Comparing Health Insurance Reform Options: From “Building on the ACA” to Single Payer

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The Affordable Care Act (ACA) has substantially reduced the number of uninsured Americans, increased access to care, reduced uncompensated care for hospitals and other providers, and largely eliminated discrimination against the sick in private health insurance markets. Still, significant problems remain: 30 million people in the United States remain uninsured, while many others are underinsured — meaning they lack adequate financial protection against high health care costs.

While many people have experienced lower costs after getting coverage through the ACA, others have found that premiums and cost-sharing requirements are still too high to participate. Following a Supreme Court decision that made Medicaid expansion optional for states, many poor adults in the 17 states that have yet to expand the program have been left without any financial assistance for coverage. Additional policy changes made by the Trump administration and Congress since early 2017 have created new problems and exacerbated others.

During the 2020 presidential election season, plans for addressing these and other shortcomings will be central to candidates’ campaigns and a focus of presidential debates. A uniform framework that compares coverage and cost implications of different proposals will help policymakers and citizens make more objective, thoughtful comparisons of the advantages and disadvantages of different policy options.

In this report, we analyze eight health care reform packages intended to address shortcomings of the current health insurance system. We estimate their potential effects on health insurance coverage and spending by government, households, and employers. The packages represent an amalgam of ideas developed by policymakers, presidential candidates, and policy experts. Some would make fundamental changes to the structure of the U.S. health insurance system, while others would build on the existing system. Because new bills are regularly introduced and details of existing bills are likely to change, our work focuses on reform approaches rather than particular pieces of legislation.

The reforms we feature run along a continuum from less to more comprehensive in their coverage and impact on government costs. They range from a set of incremental improvements to the ACA to a single-payer plan similar to some “Medicare for All” proposals. For a brief summary of our methods, see “How We Conducted This Study” below. For those seeking additional background on our methods as well as additional findings and discussion, see the full version of this report here.

The first six reform packages build on one another; the last two are alternative approaches to a single-payer health system.

Reforms that build on the ACA:

1. ACA Enhanced I: Improves the ACA’s current premium and cost-sharing subsidies and adds a reinsurance program for the individual market to protect insurers against very high claims.

2. ACA Enhanced II: In addition to the above reforms, this package includes restoration of the ACA’s individual mandate penalty and reversal of the Trump administration’s expansion of short-term, limited-duration plans.

3. ACA Enhanced III: This package builds on Reform 2 by closing the Medicaid eligibility gap for adults with very low incomes in states that have not expanded their Medicaid program. It also introduces a limited autoenrollment mechanism for most people receiving benefits from the Temporary Assistance for Needy Families (TANF) or Supplemental Nutrition Assistance Program (SNAP) programs.

4. ACA Enhanced IV: Adds to the reforms in #3 a public plan option and/or a capping of the provider payment rates in private nongroup insurance plans.

5. Universal Coverage I: The first reform plan to achieve universal coverage, this builds on #4 by enabling workers to opt for subsidized nongroup coverage instead of their employer’s insurance plan and introducing a mechanism through which all legal U.S. residents are deemed insured. This reform features a public option in the nongroup market.

6. Universal Coverage II: Adds to #5 by boosting premium and cost-sharing subsidies further.

Single-payer plans:

7. Single Payer “Lite”: A single-payer plan that covers all people legally residing in the U.S. and includes all the ACA’s “essential health benefits.”¹ There is cost-sharing for individuals pegged to income (consistent with those in reforms 1–5) but no premiums. There is no private insurance option.

8. Single Payer Enhanced: This plan covers all U.S. residents, including undocumented immigrants, and features a broader set of benefits than Single Payer “Lite,” including adult dental, vision, and hearing care as a well as a home- and community-based long-term services and supports benefit. In addition, there are no cost-sharing requirements. There is no private insurance option.

Highlights in Brief

• Each reform option improves the affordability of health insurance considerably through lower premiums and cost-sharing and broader public program eligibility. Reductions in consumer costs are greatest in the single-payer plans. But as affordability increases, the taxes necessary to finance the reforms would increase as well.
• Reaching true universal coverage requires either an autoenrollment mechanism for those not voluntarily enrolling in insurance or a single-payer system that enrolls the entire population in a single plan.
• Employer coverage falls as the generosity of assistance in the individual market increases. The single-payer options eliminate employer coverage (and other private insurance) altogether.
• In general, federal spending increases as subsidized coverage becomes more generous and more people enroll. However, the individual mandate, reinsurance, and cost-containment strategies like the introduction of a public plan option, can also lower the federal funds necessary to finance reform.
• If the employer insurance system remains largely intact, universal or near-universal coverage can be achieved with reasonably moderate increases in federal spending.
• Under our Single Payer “Lite” reform (#7), total national spending on health care falls relative to current law. But under the more expansive Single Payer Enhanced reform (#8), national health spending increases, because the costs of additional coverage, greater benefits (more services and no household cost-sharing), and coverage of 11 million undocumented immigrants exceed the savings from lower provider payment rates and administrative costs.

The Reforms: Projected Impacts

Below we present our estimated changes in health insurance coverage, federal government spending, and total national health spending (combined costs to employers, households, government, and uncompensated care delivered by health care providers) under each reform option, compared to current law. In addition, we show the increase in federal revenues needed to finance each reform after netting out any additional income tax revenues that result from reductions in employer-based insurance and corresponding wage increases.² For ease of comparison, all estimates are based on reforms as if they are fully phased in and in equilibrium in 2020 — meaning that the number of providers has grown to meet the new demand for services and that households and employers have completely adjusted their coverage decisions in response to policy changes.

The components of all of the reforms simulated are summarized in the table below. In addition, descriptions accompany the analytic findings for each reform package.

Features:

• More generous premium and cost-sharing subsidies for enrollees in marketplace plans; premiums capped at lower percent of income (0% to 8.5%) than under ACA; schedule is shown in the appendix
• Permanent reinsurance program for insurers in individual market

Coverage gains: Reduces the number of uninsured Americans by 4.0 million people, a 12.5% reduction. Increases by 4.6 million the number of people who have minimum essential coverage (taking into account a reduced number of people enrolled in short-term, limited-duration plans). Employer coverage is largely unaffected, while the number of people with ACA-compliant nongroup coverage increases by 5.3 million people (subsidized and unsubsidized combined).

Federal government spending: Increases by $25.7 billion in 2020, and $321 billion over 10 years.

Total national spending: Increases slightly, by $7.8 billion, or 0.2 percent, in 2020.

Features:

• More generous premium and cost-sharing subsidies for enrollees in marketplace plans; premiums capped at lower percent of income (0% to 8.5%) than under ACA; schedule is shown in the appendix
• Permanent reinsurance program for insurers in individual market
• Restored individual mandate
• Prohibition on short-term, limited-duration plans

Additions to Reform 1: Restores nationwide individual mandate. Reverses Trump administration’s expansion of short-term, limited-duration plans that don’t have to comply with ACA rules.

Coverage gains: Expands number of people who have coverage that meets the ACA’s minimum standards by 6.3 million, an additional 1.7 million people compared to Reform 1. The number of uninsured falls by just under 4 million people. The effect of the mandate on the number of uninsured is reduced somewhat, because some of the people losing their short-term plans would not enroll in other coverage. Of the 2.4 million people with short-term plans under current law, 1.2 million get marketplace coverage (including those attracted by the additional subsidies provided in Reform 1), around 500,000 gain employer-sponsored coverage, and about 700,000 become uninsured.

Federal government spending: Federal costs increase slightly less under Reform 2 than under Reform 1: $24.5 billion in 2020, and $307 billion over 10 years. This happens because as the risk pool in the marketplaces improves because of reinstatement of the individual mandate, premiums decrease; with lower premiums, federal subsidy costs decrease.

Total national spending: As with Reform 1, national health spending increases very little.

Features:

• More generous premium and cost-sharing subsidies for enrollees in marketplace plans; premiums capped at lower percent of income (0% to 8.5%) than under ACA; schedule is shown in the appendix
• Permanent reinsurance program for insurers in individual market
• Individual mandate
• Prohibition on short-term, limited-duration plans
• Closing of Medicaid gap in states that didn’t expand eligibility
• Limited autoenrollment for most TANF and SNAP enrollees.

Additions to Reform 2: Fills Medicaid eligibility gap by making ineligible people under 100 percent of the federal poverty level eligible for marketplace plan subsidies in states that have not expanded Medicaid. Provides 100 percent federal expansion funding for expansion states. Introduces limited autoenrollment.

Coverage gains: The number of uninsured drops by 10.8 million people compared to current law, a decrease of 6.9 million compared to Reform 2. The increased coverage results from greater enrollment in both marketplace plans (because of subsidies that are extended to poor people in states that have not expanded Medicaid and limited autoenrollment) and in Medicaid (because of the limited autoenrollment program for TANF and SNAP enrollees). Limited autoenrollment program and increased subsidy eligibility also decrease employer coverage modestly, about 2 percent.

Federal government spending: Increases by $81.3 billion in 2020, and $1.0 trillion over 10 years. The increase is because of the federal government taking on the 10 percent of Medicaid expansion costs paid by states under current law plus the federal costs associated with additional enrollment of newly subsidy-eligible people in nonexpansion states, and limited autoenrollment into both programs.

Total national spending: Increases by $39.6 billion or 1.1 percent in 2020, because of increases in the number of people covered.

Features:

• More generous premium and cost-sharing subsidies for enrollees in marketplace plans; premiums capped at lower percent of income (0% to 8.5%) than under ACA; schedule is shown in the appendix
• Permanent reinsurance program for insurers in individual market
• Individual mandate
• Prohibition on short-term, limited-duration plans
• Closing of Medicaid gap in states that didn’t expand eligibility
• Limited autoenrollment for most TANF and SNAP enrollees
• Public plan option and/or capped provider payment rates in private nongroup insurance market

Additions to Reform 3: Public option and/or caps for provider payment rates in private nongroup insurance.

Coverage gains: The lower premiums resulting from the public option and/or capped provider payment rates in the nongroup market reduce costs but do not increase coverage substantially beyond the gains under the previous reforms. This is because the public option/capped rates only lower household-paid premiums for people who must pay the full premium in the nongroup market. The expanded financial assistance introduced in the earlier reforms means many fewer uninsured people would pay the full premium.

Federal government spending: Increases by $46.7 billion in 2020, and $590 billion over 10 years. The largest difference between this reform and Reform 3 is considerably lower federal spending on marketplace subsidies ($73.9 billion vs. $108.7 billion, not shown here). Lower provider payment rates lead to lower premiums, and lower premiums lead to lower tax credits. In addition, lower provider rates result in fewer out-of-pocket costs for some households and lower cost-sharing subsidy payments by the federal government.

Total national spending: Does not increase compared to current law, even though nearly 11 million more people are insured.

Features:

• More generous premium and cost-sharing subsidies for enrollees in marketplace plans; premiums capped at lower percent of income (0% to 8.5%) than under ACA; schedule is shown in the appendix
• Permanent reinsurance program for insurers in individual market
• Prohibition on short-term, limited-duration plans
• Closing of Medicaid gap in states that didn’t expand eligibility
• Limited autoenrollment for most TANF and SNAP enrollees
• Nongroup public option, possibly combined with capped provider payment rates for other nongroup insurers
• Elimination of employer insurance “firewall”: workers can opt for subsidized nongroup plan instead of their employer’s plan
• Continuous autoenrollment with retroactive enforcement³

Additions to Reform 4: Mechanism for deeming all legal U.S. residents insured and removal of employer-sponsored insurance offer firewall. Requires public option in nongroup market.

Coverage gains: This is the first of the reform packages to achieve universal coverage for people legally present in the U.S., decreasing the number of uninsured by 25.6 million people. The reform leaves 6.6 million uninsured (all undocumented residents), equivalent to a nearly 80 percent reduction compared to current law. Eliminating the employer insurance firewall decreases the number of people with employer coverage. Combined with the other reforms, enrollment in employer plans drops by 15.0 million people, or 10.2 percent. Coverage in the nongroup insurance market increases by 30.8 million, with over 80 percent of enrollees receiving federal financial assistance. Medicaid/CHIP coverage also increases markedly, by 12.2 million people, because of autoenrollment.

Federal government spending: With many more people enrolled in subsidized coverage, federal costs increase as well. Reform 5 increases government health spending by $122.1 billion in 2020, and $1.5 trillion over 10 years.

Total national spending: Decreases modestly, by $22.6 billion or 0.6 percent in 2020, compared to current law.

Features:

• Even more generous premium and cost-sharing subsidies for enrollees in marketplace plans; premiums capped at lower percent of income (0% to 8.0%) than under ACA or reforms 1–5; schedule is shown in the appendix
• Permanent reinsurance program for insurers in individual market
• Prohibition on short-term, limited-duration plans
• Closing of Medicaid gap in states that didn’t expand eligibility
• Limited autoenrollment for most TANF and SNAP enrollees
• Nongroup public option, possibly combined with capped provider payment rates for other nongroup insurers
• Elimination of employer insurance “firewall”: workers can opt for subsidized nongroup plan instead of their employer’s plan
• Continuous autoenrollment with retroactive enforcement

Additions to Reform 5: More generous premium and cost-sharing subsidies.

Coverage gains: Overall levels of insurance coverage under Reform 6 are the same as under Reform 5; both include the autoenrollment provisions for all legally present U.S. residents. As a result, the number of uninsured is 6.6 million, all undocumented immigrants. However, the further enhanced nongroup market subsidies in Reform 6 compared to Reform 5 mean approximately 800,000 fewer people enroll in employer-based coverage.

Federal government spending: Because of the more generous subsidies, federal health care spending is $161.8 billion higher in 2020 compared to current law, and $2.0 trillion higher over 10 years.

Total national spending: Decreases modestly compared to current law, less than 1 percent.

Features:

• Single-payer system covering ACA essential health benefits
• No premiums
• Income-related cost-sharing (consistent with reforms 1–5); schedule is shown in the appendix
• Coverage of all legally present U.S. residents
• Private insurance prohibited

Coverage gains: While 25.6 million uninsured legally residing U.S. residents gain coverage under Reform 7 (the same as in reforms 5 and 6), an additional 4.2 million undocumented immigrants become uninsured, lowering the net increase in coverage to 21.4 million people. The increase in uninsured undocumented residents relative to current law occurs because this reform eliminates private insurance and the single-payer plan does not cover those not legally present. In contrast, reforms 5 and 6 retain private insurance, in which the undocumented or their employers could purchase coverage with their own funds. The total uninsured population is 10.8 million people, all undocumented residents.

Federal government spending: Increases by $1.5 trillion in 2020, and $17.6 trillion over 10 years.

Total national spending: Falls by $209.5 billion, or 6.0 percent in 2020, reflecting savings from lower provider payment rates and administrative savings that outweigh the increased costs associated with near-universal coverage and lower cost-sharing requirements.⁴

Features:

• Government plan with broad benefits, including adult dental, vision, hearing, and new home- and community-based long-term services and supports
• No premiums or cost-sharing
• Includes all U.S. residents
• Private insurance prohibited

Additions to Reform 7: Covers broader set of benefits with no cost- sharing requirements. Covers undocumented residents.

Coverage gains: Reform 8 is the only one we present that, by design, covers everyone in the legally present and undocumented immigrant populations.⁵ We estimate this single-payer program covers 331.5 million people. No uninsured people remain.

Federal government spending: Rises by $2.8 trillion in 2020, and $34.0 trillion over 10 years. Shifting existing state government and private spending to the federal government accounts for much of this increase.

Total national spending: Grows by about $720 billion in 2020. Employer, household, and state spending decline considerably but by less than the increase in federal spending.⁶ Increased consumption of health care, a result of more generous benefits and no out-of-pocket costs, is greater than savings from lower provider payments and administrative costs.

Discussion

We raise five issues that we believe are particularly important to consider when designing health insurance system reforms.

1. Levels of provider payment rates. Many of the reforms being discussed today revolve around at least some regulation of the payment rates for health care providers (for example, our reforms 4 through 8). Today, payments to hospitals and physicians vary considerably across services, provider types, insurers, individual providers, and geographic areas. How much and how fast provider payment rates can be reduced without affecting access and quality of care is unknown. The more people enrolled in rate-regulated coverage, the greater the implications of where the payment levels are set.
2. Phase-in period. Our estimates assume immediate full implementation of each set of reforms. As reforms increase in breadth, the necessary phase-in period lengthens. The first years of a reform’s implementation may be focused on creating new systems related to eligibility and enrollment and developing new payment systems and regulations, lowering total costs in the budget window. We assume for this analysis that provider supply will, over time, expand to meet the increased demand for services. Therefore, we have not estimated constraints on the supply of medical services. However, the expansion of supply for particular services may take longer than for others, particularly under the single-payer plan in Reform 8. Thus, in the short run, national health spending could be somewhat lower than what we estimate, but that would also mean that promised improvements in access to care would not occur uniformly. Finally, the larger the population enrolled in coverage with lower, regulated provider payment rates, the more important it will be to phase in lower reimbursement levels over time in order to minimize disruption in the health care delivery system. This approach would increase costs over the phase-in period.
3. Effects on employer health care spending and wages. We estimate reductions in health care spending by employers for each set of reforms. These reductions increase as we move from incremental to more ambitious reform approaches. A substantial body of economic research indicates that reductions in employer spending on health care is passed back, over time, to workers in the form of higher wages.⁷ Thus, in equilibrium, employers will spend significantly less on health care under some of the reforms we present, but they are unlikely to experience considerable overall savings or improvements in profitability.
4. Effects on household spending. Depending on the reform approach and income level, households see considerable savings in health care costs, with the greatest savings under the incremental approaches accruing to lower- and middle-income families. Health care savings are very large across the board under the single-payer plans. However, households will face higher taxes with any of these reforms, and these taxes are not accounted for here.
5. Effects on total national health spending. These estimates demonstrate that it is possible to design a set of insurance reforms that achieves universal coverage for the legally present U.S. population without increasing total national health spending. Reforms 5 and 6 do this through mechanisms that maintain sizable private insurance markets, while Reform 7 (Single Payer “Lite”) relies entirely on a government insurance program. The more expansive Single Payer Enhanced option (#8) differs markedly on this measure, however.

Whether or not a single-payer plan increases total national health spending depends on the extent to which utilization of health care services increases because of added benefits and reduced cost-sharing; the levels at which provider payment rates are set; the needed administrative costs to run the program; and the number of people covered. Under our Single Payer “Lite” option, national health spending falls relative to current law, while it increases under Single Payer Enhanced. With the latter, the costs of additional coverage, greater benefits, and coverage of 11 million undocumented immigrants exceeds the savings from lower provider payment rates and administrative costs.

How We Conducted This Study

Our analysis relies on the Urban Institute Health Policy Center’s Health Insurance Policy Simulation Model (HIPSM) and Urban’s new Medicare simulation model, MCARE-SIM, in addition to Urban’s Dynamic Simulation of Income Model (DYNASIM). HIPSM is a detailed microsimulation model of the health care system designed to estimate the cost and coverage effects of proposed health care policy options for the nonelderly (U.S. residents below age 65 not enrolled in the Medicare program). We regularly update the model to reflect published Medicaid and marketplace enrollment and costs in each state. For example, the current version takes into account each state’s marketplace premiums and enrollment after the 2019 open enrollment period. The enrollment experience in each state under current law affects how the model simulates policy alternatives. HIPSM is used in every reform estimated in this analysis.

MCARE-SIM is based on data from the 2015 Medicare Current Beneficiary Survey, projected here to 2020. It is designed to simulate changes to household and government costs because of changes in benefits, cost-sharing, and premiums for people age 65 and older and younger people enrolled in the Medicare program.⁸ The model simulates health care spending and costs for Medicare enrollees in the traditional program (Parts A, B, and D) and in Medicare Advantage, as well as supplemental coverage like Medigap. MCARE-SIM is used here to estimate the spending and distributional consequences of single-payer reforms that would affect not only the nonelderly (the ACA target population), but also those enrolled in Medicare under current law.

In addition, one of the single-payer reforms simulated here includes new benefits for long-term services and supports. These estimates are developed using estimates from recent historical data sources, including the Health and Retirement Study, National Health Interview Survey, and National Health and Aging Trends study, combined with estimates from the Urban Institute’s DYNASIM and a wide range of estimates from published reports.

We begin each simulation with a current law baseline in 2020, and we then estimate the effects of implementing each of the eight health care reform options. Plus, we compute 10-year estimates of the increase in federal government costs associated with each reform from 2020 to 2029. All estimates assume reforms are fully phased in and in equilibrium in 2020.

Additional resources on this work from the Urban Institute are available here.

Acknowledgments

This report was funded by the Commonwealth Fund. We are grateful to them and to all our funders, who make it possible for Urban to advance its mission.

The views expressed are those of the authors and should not be attributed to the Urban Institute, its trustees, or its funders. Funders do not determine research findings of the insights and recommendations of Urban experts. Further information on the Urban Institute’s funding principles is available here.

The authors are grateful for comments and suggestions from Sherry Glied and Robert Reishchauer and for research assistance from Caroline Elmendorf and Erik Wengle.

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