Bipartisan Tax-Free Solution to Health Care Financing: Coupling HRAs With a Public Option

A combination of health insurance initiatives by the presumptive 2020 Democratic and Republican presidential nominees could expand health care coverage and significantly reduce costs, without raising taxes. Along the way, the combination could revitalize private insurance plans’ competition. One initiative, proposed by former Democratic Vice President Joseph Biden, requires a Public Option so non-seniors can enroll in Medicare. The other initiative is President Donald Trump’s rule that enables employees in small and medium sized enterprises (SMEs) to use pre-tax funds, which their employers deposit in Individual Coverage Health Reimbursement Arrangements (ICHRAs). Under this HRA-Public Option combination, the employee could buy a suitable ACA plan that would be administered by private insurers ,paying Medicare’s rates, with its substantial economies. In addition, if the Public Option-HRA combination were priced to reduce Medicare‘s unfunded liabilities, its price would remain lower than Obamacare or those paid by SME enrollees. Simultaneously, combining HRAs with the Public Option would spur private health insurers to compete by using their massive scale to reduce the bloated U.S. health care system. They could compete by reducing the estimated waste in the health care system of $900 billion; experts estimate that at least 250 billion could be saved without diminishing the quality of care.