How to fix American healthcare

Mandatory ICHRA and ending the ACA

Americans are furious about healthcare. Insurance company CEOs are getting gunned down in Manhattan. The government just ended the longest shutdown in American history fighting over subsidies.

There is a solution. It isn’t single-payer. It isn’t more subsidies. But it requires understanding why the system is broken in the first place.

We built two health insurance markets in America. Same insurance companies. Same hospitals. Same country. One works fine. The other requires $350 billion in annual life support.

160 million Americans get insurance through their employers. Their premiums are stable. Their coverage is decent.

24 million Americans buy insurance on the individual market. Their premiums are astronomical. Their coverage is terrible. Without government subsidies, it would collapse tomorrow.

Same insurers. Same doctors. Same drugs. The difference is who’s in the pool.

Why Pools Matter

Employer health insurance works because a company’s workforce looks roughly like America: young and old, healthy and sick, desk workers and warehouse staff. Insurers can price this mix. The math works.

The individual market has a different pool. It’s where you end up if you don’t have employer coverage: self-employed, between jobs, early retirees waiting for Medicare. This pool skews old and sick.

If you’re young and healthy and your employer offers insurance, you take it. The people left buying individual coverage are disproportionately the people who really need it.

The Death Spiral

Economists call this adverse selection. I call it a death spiral.

When your pool is mostly sick people, premiums are high. When premiums are high, healthy people opt out—they’d rather take the risk than pay $400/month for coverage they probably won’t use. When healthy people leave, the pool gets even sicker. Premiums rise again. More healthy people leave.

Repeat until collapse.

The Affordable Care Act bet that subsidies could break this cycle. Make coverage artificially affordable, and healthy people will join. Balance the pool. Stabilize premiums.

It didn’t work.

A healthy 30-year-old freelance designer in Austin looks at the exchanges today. Even with subsidies, she’s paying $300/month for a plan with a $6,000 deductible. That’s $3,600 per year plus $6,000 before the insurance actually kicks in. For someone who goes to the doctor once a year.

There’s no penalty for skipping coverage anymore. She does the math. She opts out.

Multiply her by millions of people, and you understand why 90% of individual market enrollees need subsidies to afford coverage. When nine out of ten customers need government assistance to buy your product, you don’t have a market. You have welfare wearing a market’s clothes.

Fix the Pool, Fix the Problem

You can’t solve pool problems with money. You can only solve them with different pools.

Imagine if tomorrow, every American bought insurance on the same market. Young tech workers in San Francisco. Retirees in Florida. Factory workers in Ohio. One giant pool that looks like America.

The death spiral would break. Adverse selection would disappear. The individual market would become as stable as employer insurance, because it would be employer insurance—just portable.

ICHRA

Individual Coverage Health Reimbursement Arrangements were created in 2019. Instead of your employer picking a health plan and offering it to everyone, they give you tax-free money to buy your own coverage on the individual market. Same tax treatment as traditional employer insurance. Same total cost. But you choose the plan, and it’s yours—it doesn’t disappear when you change jobs.

About a million people use ICHRAs today. Growing 52% annually among small businesses. Employers like it because it’s simpler. Employees like it because they have choice.

Now imagine making it mandatory.

Tomorrow, every employer stops offering health insurance directly. Instead, they contribute what they were already spending—around $8,500 for individuals, $30,000 for families—to their employees’ ICHRAs. Employees use that money to buy coverage on the individual market.

The ACA pool goes from 24 million to 184 million. Young, healthy workers flood in alongside older, sicker enrollees. Risk spreads across the entire working population. The pool transforms from “sick people who can’t get employer coverage” to “Americans.”

When your risk pool looks like America, you don’t need $350 billion in subsidies. You need maybe $50 billion for targeted assistance to people who genuinely can’t afford coverage—not 90% of enrollees.

Kill the Exchanges

This requires killing the ACA exchanges as they exist today.

Not reforming them. Not improving them. Ending the subsidies that keep a broken pool on life support and replacing them with something that actually works.

The exchanges were designed for a pool that doesn’t exist: healthy young people voluntarily buying coverage alongside sick older people. That pool never materialized because the incentives are wrong. No amount of subsidy fixes bad incentives.

Mandatory ICHRA doesn’t need subsidies to function. When the pool looks like America, premiums stabilize on their own. You only need targeted assistance for people below the poverty line—not 90% of enrollees.

The other thing that changes: plan availability.

Right now, insurers offer limited plans on the exchanges because the pool is toxic. Why design good products for a market full of expensive patients?

When 184 million Americans are buying on the individual market, insurers will compete for them the way they compete for employer contracts today. More plans. Better networks. Actual choice. The same insurers who offer great employer coverage will offer great individual coverage—because it’s the same pool.

The Leash

Your health insurance is a leash. It ties you to your job. If you want to start a company, go freelance, or take a year off, you have to figure out the insurance problem. For people with families or health conditions, this can be paralyzing.

Employer-sponsored insurance made sense in 1943, when it was a wartime workaround for wage controls. It doesn’t make sense now. Your health coverage shouldn’t depend on where you work any more than your car insurance depends on where you work.

Portable insurance means you can take risks. Start companies. Change careers. Move to cheaper cities. The insurance follows you, because it was always yours.

Permanent Insurance, Aligned Incentives

When your insurance is portable and permanent, the insurance company’s incentives change. Right now, they’re optimizing for the three years you’ll be on their plan before you switch jobs. Why invest in preventive care when some other insurer will reap the benefits?

If you’re insured by the same company for decades, suddenly they care about keeping you healthy at 35 so they don’t pay for your heart attack at 55. The economics flip from “minimize this quarter’s costs” to “minimize lifetime costs.” That’s when you start getting calls reminding you to schedule your colonoscopy.

The Choice

The American healthcare system isn’t broken because we spend too little. We spend more per capita than any country on Earth. It’s broken because we built two markets when we should have built one.

For fifteen years, we’ve tried to fix a poisoned pool by pouring money into it. $350 billion a year. It hasn’t worked. It was never going to work. You can’t fix adverse selection with subsidies. You can only fix it by changing who’s in the pool.

The left wants universal coverage. The right wants market-based solutions. This is both. Everyone gets insurance. Everyone buys it on a real market. The pool works because it includes everyone.

The fix is three steps:

End the ACA exchanges. End the subsidies. Mandate ICHRA.

That’s it. No new bureaucracies. No government takeover. Just one big pool that looks like America, where insurers compete for your business and your coverage follows you for life.

We’ve spent fifteen years and trillions of dollars covering up the failure of the ACA. It’s time to stop.