Private Insurance Can’t Survive Under Kamala Harris’ Healthcare Plan. Here’s Why

Employers won’t be incentivized—or able—to offer plans that best a government option.

At the Democratic presidential debate in Detroit on Wednesday evening, Senator Kamala Harris made a big point of stressing that her healthcare plan is superior to those of her more radical rivals because it includes a private option. “I listened to American families who want an option that will be under your Medicare system that allows a private plan,” said Harris. “There will be a public plan…and a private plan.”

The night before, Senators Bernie Sanders (I-Vt.) and Elizabeth Warren (D-Ma.) stood united in a fierce call-to-arms for their shared vision of Medicare for All––an idea that would effectively kill all private insurance the day it became law. Senator Harris (D-Ca.) is distancing herself from the Sanders-Warren approach by championing a seemingly more centrist plan that give private insurers a role in the new regime by allowing them to offer their own Medicare-style plans if the benefits are even richer. Harris is reassuring voters that if they like private insurance, they can keep getting private insurance.

But a close examination of the Harris RX points to a single possible outcome: Her vision would eliminate all major private plans almost as fast as under the blow-it-up-now upheaval advocated by Sanders and Warren. America’s workers would flee company plans fast and en masse as soon as KamalaCare is enacted, and companies would happily dump the burden of insuring their workers. In the words of economist Joseph Antos, a former Congressional Budget Office and HHS official and scholar at the conservative American Enterprise Institute, “Employees would have to be nuts to keep paying for private plans when they can get richer coverage for free under Harris’ Medicare for All.”

On July 29, Harris issued an 8-page campaign document entitled “My Plan for Medicare For All.” Although it’s more an essay than a detailed outline for legislation, her manifesto lays out the incentives guaranteeing that employer coverage wouldn’t last long. Harris would immediately introduce an insurmountable competitor to private insurance available to everyone, mostly for free. As Harris puts it, “When I pass my plan, all Americans will immediately have the ability to buy into Medicare.” But she also gives families the option of joining private plans. The choices don’t include keeping your existing company-provided insurance. The sole choice would be coverage based on an expanded version of the Medicare Advantage plans, offered to seniors as an alternative to standard Medicare by giant carriers such as UnitedHealthcare and Aetna.

Medicare Advantage policies now serve one-third of all seniors. They’re attracting hordes of retirees by providing extra services such as dental and vision care, and prescription drug benefits, that aren’t covered by regular Medicare, at lower or no premiums. The Medicare Advantage plans receive fixed payments from Medicare for each member based on detailed data delineating their health risks––the sicker the patient, the higher the payment. Critics charge the Medicare Advantage insurers with collecting a lot more from Medicare than their members really cost. In her essay, Harris isn’t tender in characterizing the industry, insisting that under her regime providers will be “unable to profit off gaming consumers or the government.”

Harris would would move to Medicare for All over “a ten-year phase in period.” During that transition, families now covered by Medicaid and the Affordable Care Act would become part of a single, Medicare for All system. But today’s employer plans wouldn’t phase out; they’d be replaced the day KamalaCare is enacted by the only private option, Medicare Advantage-style plans. She would impose new requirements on Medicare for All that would endanger the category by curbing or eliminating profits. To qualify under the new rules, those programs would face far stricter limits on what they’re paid by Medicare, and at the same time, and be obligated to offer a long list of benefits they don’t now provide––examples might be free hearing aids or dental implants. “We would allow private insurance to offer a plan in the Medicare system, but they would be subject to strict requirements to ensure it lowers costs and expands service,” Harris writes. “If they want to play by our rules, they can be in the system. If not, they have to get out.”

In comparison, Harris pledges that her Medicare for All plan will provide a much richer package than today’s Medicare, including a full suite of vision, hearing and dental benefits. She also pledges more exhaustive substance abuse and mental health coverage.

But the details she provides on what Medicare would pay those plans (less) and what they’d be required to offer (more) suggests that the private option would be dead-on-arrival. Under the Sanders proposal, Americans earning over $29,000 a year would pay a premium amounting to 4% of their incomes for Medicare for All. Harris is more generous, exempting people with incomes up to $100,000 for any premium, and adjusting that number upwards for high-cost locales. She’d cover the loss in revenue versus BernieCare by imposing fees on stock, bond and options trading.

Put simply, the Harris platform makes the private option both economically unviable for companies, and a poor choice versus her Medicare for All for workers. The problem may be even more basic. It’s not even certain that Medicare Advantage plans, given the new restrictions, will be profitable enough for insurers to keep offering them.

Imagine you’re a worker at GE, Ford, or Amazon making $80,000 a year. Premiums for medical and dental are getting deducted from your paycheck every two weeks, and those contributions keep rising. KamlaCare becomes law. Now, your existing plan vanishes.

You’ll face two possibilities. The first is that Medicare Advantage disappears. The reason it faces extinction: Medicare for All will provide you with eyeglasses, dental fillings and implants, hearing aids––benefits that are richer than those Medicare now provides. Any new Medicare Advantage Plan would need to offer much more generous coverage than it does now simply to match Medicare for All. Those plans would also receive lower payments per member than Medicare now pays, a Harris goal. The combination of rising costs and shrinking payments could wipe out profits. The odds are high that the Medicare Advantage industry would disappear. That’s Antos’ view. “Her plan will kill Medicare Advantage,” he says.

The second, less likely possibility is that private insurance survives for a while as an option offered by employers. In that scenario, companies would offer you an Advantage-style plan administered the UnitedHealth, Aetna or another insurer, replacing their previous coverage. The problem: To match the ultra-rich regular Medicare benefits and still make a profit, the Advantage plans will need much higher premiums. As an $80,000 a year employee, you’d have to pay part of that premium, just as you contribute for coverage today. The alternative is getting the Medicare for All package at a zero premium. So why keep paying when you can get a Rolls-Royce plan for free? “Employees would start dropping out of corporate plans as soon as Harris’ Medicare for All takes effect,” says Antos.

The end game would be the same. You’d really have no choice. Fleeing workers would force corporate America to eliminate healthcare coverage. “Health insurance is a volume business,” says Antos. “If you get enough people dropping out of company plans, it will cost more per worker, and it won’t make business sense for companies to provide those plans through Medicare Advantage.” Hence, HR departments will demonstrate to workers that they’ll get more benefits, either for free or at much lower premiums, if they buy into Medicare for All. It will all make sense. Employers won’t look like they’re dumping workers, because it’s the workers who will be choosing a far better deal.

An interesting issue arises. Say the employer is paying $10,000 a year in premiums for you as that $80,000 worker. Suddenly, in the Harris regime, the company is paying nothing for its employees’ healthcare. Your all-in package is costing $10,000 less. That’s extra money the employer can use to give you a raise. After deducting 35% in taxes, your paycheck would get $6500 a year fatter. Or the company could divide the ten grand between giving you a smaller raise, and investing more in new plants or a new computer system. Or hiring more workers.

Sounds great. But keep in mind that what looks like a windfall for companies and workers could be erased by gigantic tax increases that could hobble the economy, hammering wages, jobs, and profits. The arrival of “free” healthcare could start the bell tolling for America’s great growth machine.

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