Smart Benefits: Romney Vs. Obama on Healthcare

Tuesday, September 18, 2012

Amy Gallagher, GoLocalWorcester Business/Health Expert

Republican Mitt Romney's proposed healthcare plan differs in a fundamental way from President Barack Obama's current plan.

While there are many disparities, and even a few similarities, between Obamacare and Mitt Romney’s plan for healthcare reform, for consumers, the differences boil down to one fundamental question: do they want more federal government intervention or less.

Obama’s plan requires an individual mandate for consumers to purchase a health plan -- or face tax consequences. Romney’s plan leaves purchasing decisions up to the consumers, but favors government conditions to expand choice through more competition, new purchasing options, and favorable tax-treatment for the consumer.

The candidates’ provisions that follow all stem directly from this foundational difference – and deserve a closer look.

Individual Mandate or Tax-Free Purchasing

President Obama's healthcare plan is based on the requirement of an individual mandate. Photo: ProgressOhio.

Under Obamacare, the individual will be required to have health insurance, or pay a tax. For Medicaid recipients and low-income individuals who qualify, each will receive a federal premium subsidy, based on a sliding income scale, to help pay for the plan. But, to get the subsidy, individuals will be required to purchase through the state healthcare Exchanges, which Obamacare requires to be operational effective January 1, 2014.

Romney’s plan will not require an individual mandate, and therefore, no tax. Rather, if individuals purchase insurance, they will be provided the same tax-free benefit that employees get. And healthcare coverage would become portable, so individuals could carry insurance with them through life rather than facing loss of coverage as personal circumstances change.

Healthcare Exchange or Not

Obamacare requires each state to set up an Exchange or default to a federally-run model. Romney will create a waiver for all 50 states to opt out of the Exchanges, and instead take a local approach to reforming healthcare that’s appropriate to the area market and needs.

Obamacare requires that plans offered through Exchanges meet specified essential benefit definitions and that a certain number are available. Individuals and Medicaid recipients will be required to purchase through the Exchanges, while some may provide for optional marketplaces, known as SHOPS, for small businesses to purchase through. Romney would encourage new joint purchasing arrangements for individuals and small businesses outside of Exchange models.

Massachusetts already has its own model of an Exchange, built on bi-partisan legislative support when Romney was Governor there. Rhode Island, on the other hand, is an early adopter of Obama’s healthcare Exchange and will proceed with one regardless of who is President. Other states, like Florida, have decided not to pursue an Exchange, and will take a wait-and-see approach. Three states with three different approaches, lends support to the idea “one size does not fit all.”

HSA’s Anyone?

Consumer-driven plans, like Health Savings Accounts (HSAs), have been limited under Obamacare – despite close to 14 million Americans using them. Currently, HSAs can be used to offset deductible expenses or pay for qualified out-of-pocket medical expenses. One limitation? Consumers cannot use funds to pay for insurance premiums linked to these savings accounts – something that would change under Romney’s plan. As a result, Romney’s approach could widen the interest in HSAs and the tax-free benefits they provide.

Dependent Coverage and Pre-Existing Condition Waivers Stay

Obamacare extends coverage to dependents to age 26 and protects against pre-existing conditions getting in the way of coverage. Since these two provisions of Obamacare have been well received, Romney has pledged to retain these benefits under his healthcare reform plan.

What about Medicare?

Obamacare closes the donut hole on prescription coverage for seniors and promises future discounts on some medications as well as preventive care services. Romney leaves Medicare in place for existing seniors but redefines coverage options for future seniors: individuals would be able to receive a defined contribution and choose between Medicare and private coverage options.

These five issues are not an exhaustive list of the differences between Obama’s and Romney’s plans, but are real-life issues that will affect how we purchase healthcare and how much we spend. The bottom line is whether you want more or less government intervention in your healthcare. You decide.

Amy Gallagher has over 19 years of healthcare industry experience. As Vice President at Cornerstone Group, she advises large employers on long-term cost-containment strategies, consumer-driven solutions and results-driven wellness programs. Amy speaks regularly on a variety of healthcare-related topics, is a member of local organizations like the Rhode Island Business Group on Health, HRM-RI, SHRM, WELCOA, and the Rhode Island Business Healthcare Advisory Council, and participates in the Lieutenant Governor’s Health Benefits Exchange work group of the Health Care Reform Commission.