The President promised that health care “reform” would expand coverage and choices for American families. Unfortunately, after a preliminary review of the “affordability credits” in the newly unveiled House bill (HR 3962), the opposite will occur. These credits limit access, limit choice and are administratively bound to fail.

Limits Access. The House bill would limit who is eligible for the “affordability credit.” First, all people below 400% FPL are technically eligible for the credit, but the bill also expands Medicaid eligibility to 150% FPL and appears to deny access to the credit to those who are “eligible” for Medicaid. This simply gives the false impression that poor people will get a choice of better care under this bill. The reality is all they get is a chance to join the substandard government-run Medicaid plan. Second, while there are some minor exceptions for those whose employer coverage exceeds 12 percent of income (an increase from the earlier bill), individuals with an offer of employer-based coverage would not be eligible. As more and more employers dump coverage (“not offering”), the price tag of the credit will skyrocket as more workers would qualify for the credit.

Fewer Choices. The House bill would only allow individuals to use these “affordability credits” to purchase coverage through the Health Insurance Exchange, including the new public plan option. Moreover, individuals could only enroll in the cheapest (“basic”) plans for the first two years. This results in the government manipulating behavior and further distorting the marketplace.

Administrative Nightmare. The credit itself is complex and filled with unintended consequences. The credit is designed to limit the annual premium, but also cost sharing and annual out of pocket costs. The administrative bureaucracy needed to implement and such a credit is mind numbing. Determining and calculating premiums, cost sharing and total out of pocket will undoubtedly lead to inefficiencies and costly mistakes.

A Better Approach
No doubt the health care system puts some individuals and families at a financial disadvantage. Specifically, the current tax treatment of health insurance only benefits those individuals who get their health insurance from the place of work. So, if you’re a worker without employer-based coverage you’re out of luck.

If Congress is serious about extending assistance to those who need it, they should start by fixing the inequities of the tax code by replacing the employee tax exclusion with a universal system of tax credits. Short of that, Congress should extend tax relief to those taxpayers who don’t get it today and offer direct and transparent assistance to others by offsetting other welfare payments. Second, consumers should be able to shop for coverage of their choice, not the coverage designed, selected, or sold by the government. Finally, the credits themselves should be simple and transparent, not hidden in a maze of complex rules and behind the scene negotiations between insurers and the government.