Debating Pre-Existing Conditions

Published October 8, 2012

National Review Online

In the wake of the drubbing President Obama took in the first presidential debate, it was inevitable that his campaign would make some adjustments for the stretch run.

So what can we expect? One option would be to roll out an actual governing agenda for a second term. One of the most striking things about the first debate was the contrast between Governor Romney’s ambitious plans for economic reform and the complete lack of ideas coming from the president. This is the same candidate who ran in 2008 on “hope and change.” Now, it’s his opponent who has a forward-looking program, while the president is essentially defending the status quo. That’s not a good position for him to be in given the miserable economic performance of the past four years. So it would make a lot of sense for the president to try to dust off some ideas and emphasize his plans for an ambitious second term.

But that doesn’t seem to be where the Obama campaign is headed. Instead of competing with Romney on ideas and an agenda, the Obama campaign has decided that the most effective way to limit a potential post-debate bounce for the Republican ticket is by hammering home a simple, negative message: Yes, Romney might have sounded better to voters in the debate, but that’s only because he’s a liar!

Now, this isn’t exactly a novel political tactic. It is standard fare in the political process for candidates to question the honesty of their opponents, especially after they have lost a public argument.

Unfortunately for the president, his attacks on Romney’s honesty are very unlikely to work, because what Romney said on Wednesday night is easily defended.

Take the issue of “pre-existing conditions” in the health-insurance system. During the debate, Romney said his approach to reforming health care would ensure that people with pre-existing conditions have insurance. The president cried foul. What Romney was promising, Obama said, wasn’t a new protection at all but just a reiteration of what current law already provides. The usual suspects in the Democratic political orbit have echoed these comments in the days after the debate.

On this point, Romney is right and the president is wrong.

Under current law, the Health Insurance Portability and Accountability Act of 1996 (HIPAA) ensures that workers can easily move from one employer plan to another without fear that their new coverage will exclude a pre-existing condition or that their new plan will increase premiums based on their elevated health risks. However, HIPAA does not provide solid protection for people who move from employer coverage to an individually owned insurance plan. In theory, HIPAA required states to set up options for those people with continuous insurance coverage and a pre-existing condition who want to move into the individual market from group insurance. In practice, those options do not prohibit insurers from charging much higher premiums based on the elevated risks of the enrollees; and, in any event, the law requires people who might enroll in such plans to first exhaust their COBRA rights with their previous employer plan. (COBRA is a program through which former employees pay premiums into their former employer’s health plan for up to 18 months after being separated from the firm.) The upshot is that HIPAA’s protections simply do not work in the individual-insurance market, and that is a big, not a small, problem.

Romney’s plan would fix this and extend to the entire health system, including the individual market, the HIPAA protections that work well today in the group market. This would allow millions of people to move seamlessly from group to individual coverage, and back again, so long as they stay continuously insured. That alone will dramatically reduce gaps in coverage that are so frequent today.

The Obama campaign will no doubt respond that this is all well and good for those who already have insurance and have the means to keep paying premiums, but what about those who are already uninsured and sick, or those families that simply do not have the resources to keep up with rising premiums?

These issues can readily be addressed within the reform framework Romney has advanced. First, regarding the uninsured, it would be a relatively straightforward policy to allow anyone who didn’t have continuous coverage to join insurance without penalty at the initiation of this program. Providing this kind of “open enrollment” option would be a powerful mechanism for reducing the ranks of the uninsured.

To improve affordability, Romney proposes to fix the discrimination in the tax law against individually owned insurance. Today, the tax law confers a large preference on employer-provided health insurance, but not on policies purchased in the individual insurance market. This is the most important reason that people without access to an employer plan are far more likely to be uninsured than those who are employed at firms that offer coverage. Romney would correct this inequity and ensure that all Americans are treated fairly, regardless of where they get their health insurance. Romney has not yet spelled out the details of how he will alter the tax treatment of health insurance, but he is clear that, under his proposals, those who aren’t in employer plans today will get substantial federal assistance to help them pay premiums in the individual market.

Of course, the real problem here is that health care is far too expensive, as Romney argued in the debate. The source of this problem is misguided federal tax and entitlement policies that discourage sensible economizing in the health sector. Instead of fixing these flaws, Obamacare doubles down on the current system by expanding enrollment into the existing entitlement structure.

While leading the state government in Massachusetts, Romney wasn’t in a position to fix the flaws in current federal law, but, if he is elected president, he will be. Fortunately, the vision for reform he has articulated during the campaign, including reform of the Medicare program, is the right one for bringing down costs. Instead of relying on federal bureaucracies to rein in costs, Romney wants to promote vigorous competition in the health sector, providing consumers more choices and greater financial control. Romney put it well in the presidential debate: Strong competition in the marketplace is almost always more effective than government at controlling costs and delivering value. That couldn’t be more true.

James C. Capretta is a fellow at the Ethics and Public Policy Center and a visiting fellow at the American Enterprise Institute.

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