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June 30 2017

Wall Street Journal: Senate Health-Care Bill Would Be a Boost to Federalism

by Charlotte Hays

Just want to call your attention to one underappreciated feature of the Senate health-care bill touted in a Wall Street Journal editorial this morning: the state waiver feature. The editorial makes an enormous claim for these waivers--that they would amount to "the greatest devolution of federal power to the states in the modern era." That would be yuge.

The editorial notes:

Senate conservatives wish the health-care bill was more ambitious on deregulation, and so do we, though the benefits of its state waiver feature are underappreciated and worth more explanation. This booster shot of federalism could become the greatest devolution of federal power to the states in the modern era.

A destructive aspect of ObamaCare, the editorial notes, was the vast expansion of federal control over medicine and the insurance business, which is treated almost like a public utility. The Senate bill does something almost unheard of: it actually reduces government control:

Once in command, the federal government rarely eases off or returns control, but the Senate bill does. The Affordable Care Act included a process in which states could apply for permission to be exempted from some rules, but conditions are so onerous that these 1332 waivers have been mostly notional. The Senate Republican draft bill makes this process quicker, more flexible and broader, which could launch a burst of state innovation.

. . .

Some conservatives in the Senate and the House are despondent because neither bill repeals the federal rules related to pre-existing conditions known as guaranteed issue and community rating. They’re right that these mandates are destructive. Community rating, which limits how much premiums can vary among people with different health status and risks, tends to blow up insurance markets, as ObamaCare is now showing.

But at least for now, conservatives have lost this political debate. There’s no Senate majority for catching the pre-existing conditions grenade, Governors aren’t hot on the idea either, and even insurers don’t want to return to the days of medical underwriting.

The Senate bet is that the 1332 waivers can help create enough of a recovery in insurance markets to overcome the distortions of these rules and bring down rates. The bill also relaxes ObamaCare’s age bands to a 5 to 1 ratio from a 3 to 1 ratio, meaning insurance for the oldest beneficiaries can be priced five times as high as for the youngest. Since age is a proxy for health risks and expenses, and a 5 to 1 ratio is close to the true actuarial cost of care, the policy result in practice is a wash.

. . .

ObamaCare’s failures have created an appetite for new alternatives. If Senate Republicans can get to 50 votes, they’ll unleash the states to build post-ObamaCare options.

Independent Women’s Forum’s mission is to improve the lives of Americans by increasing the number of women who value free markets and personal liberty. Sister organization of Independent Women’s Voice.
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