A Conservative Cure for Obamacare

By Paul Howard & Yevgeniy Feyman
Bloomberg View, November 18, 2013

The Patient Protection and Affordable Care Act is floundering.

Conservatives who take satisfaction in that should be careful not to get ahead of themselves. The rollout problems – however serious and continuing – shouldn’t be confused with the law’s outright collapse.

The reality is that large constituencies are in place to work to preserve Obamacare.

What strategy, then, would move us closer to the patient and consumer-focused health-care system that conservatives desire while also recognizing the facts on the ground?

The answer might be simple: Propose changes that will make plans more affordable and drive enhanced competition among insurers and providers. In other words, make Obamacare a Trojan horse for conservative health-care reform. The administration of President Barack Obama has quietly introduced regulatory decisions that have made the exchanges a viable market for high-deductible, health-savings-account-eligible health plans.

Shortly after the law passed, it looked like the administration would use regulatory rule-making to kill health savings accounts. But subsequent rules clarified that HSA-qualified plans were actually the default structure for bronze plans on the exchanges. (Some silver plans qualify, too.)

Far from being driven to extinction, high-deductible, HSA-eligible plans have an opportunity to capture significant new market share on the exchanges.

Conservatives aren’t going to repeal or replace Obamacare anytime soon. But they can propose smart fixes that build on the HSA-friendly exchange architecture to make the law more consumer- and patient-friendly. Reform from the inside can set the stage for even bigger changes in the not-too-distant future.


In recent months, many conservatives have been attacking Obamacare as being a Trojan horse that will open up health care to single payer, even though actually it has taken us further in the wrong direction to a private insurance-dominated market. This article from the Manhattan Institute more accurately describes Obamacare as a Trojan horse taking us to high-deductible, health-savings-account-eligible health plans, often referred to as consumer-directed health plans. But let me clarify that.

The low actuarial value plans that will dominate the Obamacare exchanges are high-deductible plans that already are or with very little tweaking will be eligible for associated health savings accounts (HSAs). HSAs work well for wealthier people who can take advantage of the tax incentives, and who remain healthy so that they can use the accumulated tax-advantaged funds in retirement. But families with more modest incomes will be selecting the low-actuarial value bronze and silver plans only because of the lower premiums. They will receive little or no tax benefit, and if major illness strikes, they may not be able to afford the out-of-pocket expenses, even if qualified for subsidies.

From a health policy perspective, the HSA component can be ignored. Except for tax incentives for the rich, the HSA is really only cash to be used for out-of-pocket payments. Even if funded by the employer, it is still paid by the employee in the form of forgone wage increases. So it is the high-deductible and not really the HSA that has such perverse consequences – patients forgoing care because of not having the money to pay the deductible, – whether having an empty pocket or an empty HSA.

What is particularly disconcerting is that it always was intended that the exchange plans be high-deductible plans, simply to control premium costs. Also, employers are now rapidly converting to high-deductible plans for the same reason. The consumer-directed advocates no longer need to hide in a Trojan horse since the deductibles are already highly visible. Right before our eyes, it has been the Trojan army of deductibles that has been conquering our health security, placing those with health care needs in servitude.

The Trojan horse came, and the neo-liberals pretend they didn’t even see it.