Below is a conversation I imagine that could have happened between President Trump and ex-Aetna CEO Mark Bertolini. I would imagine this is a simplified version of a deeper conversation, but you will get it.
Bertolini – It is great to see you Mr. President.
President Trump – Same here Mark, how are things?
Bertolini – Things are great!
President Trump – Mark, as you know, health care costs are out of control. The costs are adding to our deficit and we will never control spending if we don’t wrap our arms around health care. And the citizens are beginning to really feel the pressure from these increased costs and higher deductibles. I know you have been leading the way on how to transform the health care business. What do you think we can do in the short term and long term to stop this trend?
Bertolini – Well, the number one problem is that employers are in the middle. This is a formula that can’t work and drives up costs. Until the consumer is empowered there is little chance to controlling costs. Also, in today’s environment the insurance companies make more money when people are healthy, and the health care providers make more money when people are sick. We need the health care system to be rewarded to keep people healthy.
Trump – How do we get the employers out of the middle? Everyone says you can’t take my health care away.
Bertolini – You need to eliminate the employer deduction for health insurance. As long as it is more beneficial from a tax perspective to buy through an employer than the employee buying directly, then you will have the employer in the middle. It isn’t even fair that an employer can get a deduction, but an individual can’t. Move the deduction from the employer to the employee and that will start the process to solving this problem.
Trump – The Democrats want Medicare for All. They have also don’t like the lower corporate tax rates. I have been talking to other Republicans and they are willing to trade off keeping the lower corporate tax rates and eliminating the health care deduction at the employer level. The Democrats also don’t like the fact that it is regressive. The higher income earners get a much greater deduction in pure dollars than lower income earners. If we move the deduction to the employee, they want to make it progressive. Someone making $50,000 may get the full deduction but someone making $500,000 may not get any at all. This is a compromise that could work.
Bertolini – We did the deal with CVS because we expect the employer gets out of the middle. As I said, we need to empower the consumer. If you move the deduction to the employee, you will essentially save the individual insurance market overnight. You know that right now employers are doing everything they can to dump bad risk on the individual market and you have an army of insurance brokers assisting in this process.
Trump – Well getting this done in the next year or so is going to be tough. Budget negotiations are brutal.
Bertolini – Is there anything you can do now?
Trump – Well I can work within the current laws and do something through Executive Order. What if I made an individual policy purchased through employer contributions tax deductible? I can do that real fast.
Bertolini – That’s a great start. It will put things in motion to start the focus on the consumer. Many employers want to get out of the health risk business. They would rather give employees money and just let them buy themselves. Insurance companies will start supporting the individual market much more if you do this.
Trump – After the next election we will need to pass a budget, and I think we will have to compromise and move the deduction from employer to employee. Democrats and Republicans are on board with that.
Bertolini – This will save the private health insurance market and empower firms like Aetna/CVS to really start focusing on the consumer. I always believed that the companies that provide some form of health care need to be in the risk business. The incentives need to align with the outcomes you want to get. This will do that and drive down costs.
Trump – Thanks Mark. You have been very helpful.
June 2019 – The individual Coverage HRA becomes a reality.
Possibility – Effective January 1, 2023 Deduction for Health Insurance Moves from Employer to Employee