Health Care

Rand Paul's reform proposal could revolutionize US health care

Justin Haskins

On June 27, Sen. Rand Paul, R-Kentucky, sent a letter to Senate Majority Leader Mitch McConnell, R-Kentucky, urging him and the other Republicans in the Senate to abandon their plans to replace ObamaCare with what Paul believes—and rightly so—is a model too similar to the one created by the Affordable Care Act. Among the specific provisions Paul cites are the Senate leadership’s plan to offer millions of Americans federal tax credits and provide insurance companies with $136 billion to prop up the health insurance marketplace.

While those and many of Paul’s other points are worthy of consideration, there is one part of Paul’s health care reform wish list that is particularly important and worthy of significant attention: his call for “association health plans.”

As Paul explains in his letter, “While I appreciate the inclusion of Small Business Health Plans in the BCRA, I believe improvements could be made to expand upon this provision to allow for greater freedom for individuals and small businesses to pool together for the purpose of obtaining health insurance coverage.”

Under the BCRA, self-employed people could participate in small business health insurance plans, but Paul wants “the language [to] be changed to allow any individual, including self-employed individuals, to form associations for the purpose of purchasing group health insurance.”

While those and many of Paul’s other points are worthy of consideration, there is one part of Paul’s health care reform wish list that is particularly important and worthy of significant attention: his call for “association health plans.”

This might sound like a relatively unimportant bit of policy minutiae for those of you who aren’t interested in health care reform, but it most certainly is not. This one, largely overlooked policy addition has the potential to radically transform the health care market for the better and solve many of the problems ObamaCare attempted, but failed, to address—as well as those problems ObamaCare created.

One of the greatest challenges facing policymakers on the issue of health care is determining how to ensure all people, including people who have pre-existing conditions, can have access to high-quality, affordable health insurance. The Affordable Care Act attempted to solve this problem by dramatically restructuring the health insurance market, creating substantial government subsidies and imposing numerous costly mandates and pre-existing conditions requirements on health insurers.

“If the health insurance companies aren’t going to provide fair prices to people with pre-existing conditions, we’re going to make them,” the ObamaCare creators apparently thought. However, once you stop requiring people to have health insurance before they get sick, you cease to have a true insurance system.

Imagine for just a moment what the car insurance market would look like if uninsured drivers could smash into other people’s cars and property and then be able to call an insurer and force them to cover the accident. The price of everyone’s car insurance would skyrocket, because the car insurance companies would be required to cover expensive accidents caused by irresponsible drivers that haven’t been paying into the system. That’s essentially what has happened to the health insurance market under ObamaCare.

The flip side of that coin is under the old model, sick patients who did not have health insurance through no fault of their own couldn’t get the insurance coverage they needed at prices they could afford.

Paul’s proposal to “allow any individual, including self-employed individuals, to form associations for the purpose of purchasing group health insurance” would go a long way toward solving this policy dilemma. If people could form their own associations and purchase health insurance as a group, the pre-existing conditions problem would mostly go away, because insurers would negotiate rates with the group knowing that some people might join over time with pre-existing conditions. The costs are built into the initial price negotiated and spread out amongst all those in the association. This is exactly how many employer-sponsored health insurance plans work today.

Church groups, advocacy organizations, charities, golf clubs, and virtually any other group of people could theoretically negotiate an association health plan under Paul’s provision, allowing like-minded people to take care of each other and providing those being insured with greater negotiating power.

Also worth noting is that if more people purchase insurance plans through non-employer private associations, it would help resolve the many issues that arise when people lose their jobs, providing greater health insurance stability.

Paul, himself a physician, understands that to solve the United States’ health care problems, we need innovative solutions like his proposal to expand association health plans. What we absolutely don’t need, however, is tweaks to a model that has long failed to provide affordable, quality health insurance coverage to all Americans. 

Justin Haskins (@JustinTHaskins) is executive editor and a research fellow at The Heartland Institute.