To Lower Health Costs, Legalize Catastrophic Health Insurance Plans for All

The government shutdown has focused debate on the vast sum ($136 billion in 2025, as projected by the Congressional Budget Office) that the federal government spends annually to subsidize continually skyrocketing Obamacare health insurance premiums. The Wall Street Journal reports that regardless of how that fiscal tug-of- war turns out, health insurance premiums paid by Americans are expected to rise another 8% or 9% next year.

The mega-health insurers are leading the charge for more subsidies because this money lands right in their pockets. Their profits and stock values have been soaring while the rest of us struggle to pay the rising tab.

One reason health care costs are rising at two to three times the cost of everything else is that the entire insurance market is dysfunctional. Most Americans pay high monthly premiums (or the government pays for them) for coverage they often don’t use.

In 2024, 11.7 million people, more than one-third of those covered by Obamacare, had no medical claims. They, or taxpayers, paid a lot in premiums — for nothing.

But the whole idea of insurance is to protect your family from major expenses — not minor ones. That’s why we have fire insurance on our homes — to protect against the risk of the total loss of our property.

We need a system much more sensible and less costly for patients and taxpayers. We should be encouraging insurance plans with low premiums that cover major “catastrophic” medical expenses but leave smaller expenses — like checkups or minor surgery — to be paid by policyholders directly.

Such policies — known as catastrophic health insurance plans — have been available for several decades. Most of us would be better off financially if we signed up for these plans. With low premiums and coverage for major medical expenses, they are a win-win for families.

Even as regulated by Obamacare, this coverage charges premiums that are only about half the amount of other Obamacare plans. For example, Forbes recently analyzed the premiums of “77 catastrophic health plans nationwide.” The average premium for a 50-year-old member is $443 per month, or $5,316 per year, compared to almost $10,000 for the average Obamacare plan, according to Paragon Health Institute calculations.

This leaves a plan member with about $4,600 in saved premiums to pay for medical expenses, subject to the plan’s deductible ($9,450 per person or $18,900 for a family) — or to productively invest or spend.

The Democrats and health insurers ridicule these plans as “junk health insurance.” Wrong. Forbes notes that these plans provide comprehensive coverage for major medical expenses and have the same “10 essential health benefits” as other Obamacare plans, including emergency services, hospitalization, pregnancy services, prescription drugs, and mental health and chronic disease treatments.

So why don’t most people choose catastrophic health plans? Because an Obamacare provision makes it illegal!

This Obamacare provision, 42 U.S. Code 18022(e)(2), only allows those under 30 or who qualify under a “hardship” exemption to enroll. Liberals in Congress want to force people to buy plans they can’t afford because they generally support a single-payer government-run system where all health services are “free.”

Congress should immediately repeal this provision of Obamacare. This simple change in the law would allow all of us to choose the kind of health insurance that so many of us want and need. And wider use of these plans would cut government spending and increase economic growth.

The new tax law signed by President Donald Trump on July 4 makes these plans even more attractive. The new law allows plan members to contribute to health savings accounts. HSAs are special tax-free accounts that allow families to pay routine medical expenses, as well as roll over any unspent money in the account into tax-advantaged retirement savings. Obamacare previously had barred catastrophic health insurance plan members from contributing to HSAs.

Sometimes in life, the best solution is the simplest one: Stop the hundreds of billions of dollars of wasteful subsidies, the skyrocketing premiums, and the “one size fits all” plans that so many of us do not use, want, or need — and instead legalize pro-growth catastrophic health insurance plans for all. Stop fattening the checks of the fat and happy health insurance conglomerates like UnitedHealth, which resist paying honest claims but force you to write monthly checks for insurance you don’t use or need.

Stephen Moore is a former Trump senior economic adviser and the cofounder of Unleash Prosperity, which advocates for education freedom for all children.

David M. Simon is an Unleash Prosperity senior research fellow.

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