Rand Paul Is Right: Replace Obamacare with Group Insurance for All

The GOP is back at it. Their DOA replacement for the Affordable Care Act is being spiffed up with even more egregious attacks on low-income and chronically ill Americans. But there is hope from one of their own: Sen. Rand Paul of Kentucky.

Sen. Paul would disagree, but he has become the loudest and most credible voice endorsing universal health care – albeit under a different name. On his website and in multiple interviews, Sen. Paul advocates the establishment of nontraditional groups called Independent Health Pools (IHPs) “in order to allow individuals to pool together for the purposes of purchasing insurance…These can include…entities formed strictly for establishing an IHP.” In essence, Sen. Paul believes any American who wants to buy group medical insurance should be able to do so.

If enacted, IHPs could eliminate the most absurd peculiarity of the American healthcare system: employer-supplied medical insurance. Employer involvement with healthcare began during World War II as a way for corporations to skirt federal wage controls. Health insurance was a valuable perk that attracted job candidates while allowing employers to comply with the letter of the law. Plus, because companies could deduct the cost of the benefit as a business expense, the bottom line effect was negligible.

Employer-provided medical insurance is still widely popular. It covers the large-majority of non-elderly middle- and upper-class Americans and is rarely criticized from either side of the aisle. That’s the good news. The bad news is employer involvement with medical insurance represents ground zero in the battle to fix our dysfunctional American healthcare system. It’s the primary reason displaced workers can’t afford private insurance and why individuals with pre-existing conditions can’t find insurance companies willing to offer coverage.

My personal experience provides a textbook example. I left the corporate world in 2007 to start a business. I was covered under COBRA for about a year after leaving my former company. During that time I was billed for the same amount the company paid when I was an employee: about $17,000 per year for our family of four. When COBRA ended, we had to buy private insurance with an annual premium of $25,000 for less coverage, higher co-pays, and astronomical deductibles. We were the exact same family of four, but our out-of-pocket expenses more than doubled because I was no longer a member of a “group” and no longer qualified for group insurance rates.

Group medical insurance is a highly competitive business. Industry giants like Aetna, Cigna, and Humana bid aggressively for corporate accounts. The larger the company, the more competitive the bidding and the lower the premium. The IBMs and Walmarts of the world pay lower premiums for better coverage than their smaller competitors or mom-and-pop suppliers. That’s fine for big-company employees until they leave for a start-up or niche company. Assuming the new employer contributes the same amount as the former (typically 72% of the total premium) the employee will likely see an increase in paycheck deductions and a reduction in coverage benefits. That’s insane by any definition of the word.

That’s why I love Sen. Paul’s IHP proposal. If fully implemented, every American would come together in a true melting pot of quality healthcare services and delivery. Every working American covered by an employer-sponsored plan would receive a pay raise equal in value to their firm’s contribution towards medical insurance. The company would still be able to deduct the extra wages so there’d be no effect on corporate profits, and the employee would have the means to pay the premium negotiated by his IHP.

The more cynical observer might point out that this approach does not address the cost of health insurance which remains beyond the means of minimum-wage workers, the unemployed, and the disabled. As a nation of historically compassionate leaders, the federal government could increase the withholding tax for Medicare by a percentage or two in order to help provide or subsidize coverage for the less fortunate.

The key thing to remember is that this proposed system is nothing like the socialist abomination known as single-payer or universal health care. The Independent Health Pools epitomize the individualistic character of our nation. For the sake of efficiency, I’d personally recommend combining all the IHPs into a single entity. We could call this IHP “The United Citizens of America.” Membership would be automatic for every U.S. citizen, begin at birth, and end at death. It’s an idea whose time has come, and I’m sure Sen. Paul would agree.