CEO's advice to the next president on how to fix health care

Whatever happens in the November elections, the cost of health care will soon rise to the top of challenges facing the new president and Congress.

On the Affordable Care Act's (ACA) exchanges, the requested premium increases for average silver-tier plans for 2017 averaged 11 percent, a recent analysis of 14 states found. Looming price hikes do not appear to be limited to the states in the report. Illinois, for example, made headlines just last week over proposed jumps of up to 45 percent. Cheaper plans are being offered but come with sky-high deductibles.

A bipartisan approach to fixing the health care law's problems could start by offering refundable tax credits to all, instead of restricting subsidies to primarily low-income enrollees. Doing so would appease those calling for greater access and those seeking more competition. If the tax credits covered the cost of basic, low-priced plans, every consumer would have access to a proliferation of choices.

Moreover, consumers who preferred more coverage would have to pay the additional costs directly out of pocket, giving providers strong incentives to make prices more affordable for even the most expensive plans. Cost-saving innovations that providers may enact include back-office management improvements and shifting reimbursement models away from inflation-prone, fee-for-service medicine to a pay-for-performance model.

Health insurance models with a similar structure already have demonstrated success. Wisconsin's government employees, for example, can purchase an array of insurance plans with fixed-dollar contributions but must pay the incremental costs if they choose more-costly plans. In Dane County, home to an exceptionally large proportion of government workers, premium increases have risen far more slowly than in the rest of the state—costing 16 percent less in 2013.

Removing ineffective regulations also could lower the cost of care. For example, the regulations that govern the exchanges could allow for more channels of distribution. Rules currently limit the number of exchanges to one per state, but a natural market for affordable care may be within a particular region of the state, not throughout the state itself.

For that reason, allowing for multiple exchanges that offered localized pricing would make good financial sense in some states, including ones where the cost of doing business in, for example, an affluent city far exceeds the cost in a suburb. California adopted a similar approach. The agency that runs its public employees' health insurance prices its plans separately in five different markets within the state. In this way, plans for rural areas, where costs typically are lower, can be priced lower.

Reforms also must allow for the exchanges and broader insurance market to operate across state lines. Today, consumers purchase an endless array of products and goods from across the country, yet current policies confine health insurance shoppers to purchasing insurance from a company licensed to offer insurance in their state. Establishing a nationwide, 50-state marketplace would expand substantially the number of plans competing for consumers' business.

Americans remain divided over the Affordable Care Act, though price increases strain the wallets of all. The turmoil of this election season has pushed health care to the sidelines, but once the dust settles, the new president and Congress will have the opportunity to fix issues with access, quality, and cost. They can seize the occasion by expanding market incentives while building on the gains in broadened access.