Rand Paul

Sen. Rand Paul Introduces Replacement for Obamacare

Paul's bill equalizes tax deductibility on insurance whether obtained through employer or not, makes creating private group insurance easier, relies on Health Savings Accounts.


Sen. Rand Paul (R-Ky.) today introduced his comprehensive plan to replace Obamacare after the Republicans, as they claim they intend to, fully repeal it.


Paul calls it the "Obamacare Replacement Act" (S. 222), naturally. Among its key provisions:

• Provides a two-year open-enrollment period under which individuals with pre-existing conditions can obtain coverage.

• Restores HIPAA pre-existing conditions protections. Prior to Obamacare, HIPAA guaranteed those within the group market could obtain continuous health coverage regardless of preexisting conditions.

That's to cover those who worry about mass insurance deprivation without Obamacare. But interesting market innovations are in the bill to change the game as well:

• Replaces the existing open-ended tax exclusion for employer-provided health insurance with a universal deduction on both income and payroll taxes that would provide the same level of benefit regardless of how an individual obtains their health insurance.

Paul lamented in a conference call for media introducing the bill this afternoon that some were interpreting this as eliminating the employee tax deduction; it is not, merely extending it to individuals paying for their own as individuals or in a market-formed group.

The bill will also give "individuals the option of a tax credit of up to $5,000 per taxpayer for contributions to an HSA…. Removes the maximum allowable annual contribution, so that individuals may make unlimited contributions to an HSA….[and] Eliminates the requirement that a participant in an HSA be enrolled in a high deductible health care plan."

The full bill summary has many other details on the HSA plan, who can use it and how and for what, and its tax treatment.

Paul's bill also wants to make it easier for individuals "to pool together for the purposes of purchasing insurance" and thus "Amends the Public Health Service Act (PHSA) to allow individuals to pool together to provide for health benefits coverage through Individual Health Pools (IHPs). These can include nonprofit organizations (including churches, alumni associations, trade associations, other civic groups, or entities formed strictly for establishing an IHP) so long as the organization does not condition membership on any health status-related factor."

Paul's plan also "Increases access to individual health coverage by allowing insurers licensed to sell policies in one state to offer them to residents of any other state" with certain wrinkles explained at length in the full bill summary from Paul's office.

The bill also rejiggers the law surrounding:

Association Health Plans (AHPs) [which] allow small businesses to pool together across state lines through their membership in a trade or professional association to purchase health coverage for their employees and their families. AHPs increase the bargaining power, leverage discounts, and provide administrative efficiencies to small businesses while freeing them from state benefit mandates.

While AHPs currently exist, strict Department of Labor standards exist regarding the types of organizations that may qualify as a single large-group health plan under ERISA. The standard stipulates that the association must be a group of employers bound together by a commonality of interest (aside from providing a health plan) with vested control of the association to such an extent that they effectively operate as one employer. This is considered a difficult standard for most associations to meet.

[So Paul's bill] Amends ERISA to define AHPs and allow for their treatment as if they were large group single employer health plans. This definition would allow a dues-collecting organization maintained in good faith for a purpose other than providing health insurance to benefit from the insurance regulation exclusions currently afforded to large-group health plans under ERISA.

Paul also wants through the bill to "give new flexibilities to states in their Medicaid plan design, through existing waiver authority in current law….[to] allow states to make changes to their Medicaid plans without interference from Washington."

In a conference call this afternoon to introduce the bill, Paul said he believes that at least generically he's got Speaker of the House Paul Ryan (R-Wisc.) and Senate majority leader Mitch McConnell (R-Ky.) on board on the notion that a full replacement must happen simultaneous with repeal.

He believes his plan has "consensus ideas that 100 percent of Republicans in the House and Senate can embrace" and that they then can "take to Democrats to see if Democrats in favor of trying to replace a broken system" will also hop on board.

Paul says he finds an alternate replacement bill from Sens. Collins (Maine) and Cassidy (La.) lacking, mostly because it allows too much of Obamacare to potentially survive on the state level. He says he believes ultimately the best way to deal with very sick people with pre-existing conditions will lie with Medicaid and the states who can "look for innovative ways" to provide necessary care without bankrupting the system.

As far as the process goes, Paul says he does not expect a real repeal vote for at least two weeks. In the meantime, he says he is "pushing hard" his bill, which he's "sent to leaders in the House working on the issue, discussed it with leaders in the Senate."

He's "trying to emphasize that this bill has the potential to insure millions at cheaper cost than under Obamacare and has great ability to straighten out the mess in the individual markets."

Other media noting this announcement today include Business Insider and Rare.

Peter Suderman reported earlier this month on Paul's reluctance to repeal without a comprehensive replacement plan ready.

UPDATE: For those wanting more legislative details than the 4-page summary released yesterday and linked above, here are all 149 pages of legislative language.