President Obama has concluded that those “bad apple insurers” aren’t so bad after all. Their health plans might not meet his high standards, but they are better than nothing.
That is one way to interpret the president’s announcement that millions of people whose health plans have been cancelled could buy them for another year—but only if insurers offer them. This is a far cry from “if you like your health plan, you can keep it.” It may have partly addressed the public’s growing distrust of the president’s promises and kept congressional Democrats in line for the moment. But it does not resolve the problem.
The White House will not go to Congress seeking a change in law. Instead, Health and Human Services will simply not enforce requirements that all insurance cover a wide range of costly benefits. If an insurer wants to extend coverage and the state insurance regulator agrees, customers who received a cancellation notice will have the option to continue with their old plan. Otherwise, they must purchase a new health plan that can be more expensive and may not offer the same access to providers as the old plan.
The health insurance industry is having difficulty with this last-minute change in direction. At least three insurance commissioners have already said they will not go along with this scheme. The National Association of Insurance Commissioners pointed to the risk of changing the rules for some plans and not others. If healthier individuals remain with their current plans, the exchange plans will face escalating costs that will drive up premiums.
There is no practical way to implement the president’s new policy soon enough to avoid causing a loss of coverage for people who have insurance today. Even when the state agrees, insurers have to assess the feasibility of extending coverage under plans that had been cancelled. Some health plans that have been cancelled will not be revived.
It will take time to make current plans available for purchase. Insurance actuaries must determine premiums for 2014 based on the general rise in health costs, changes in networks of physicians and hospitals, and whether customers will remain with their current plan. The plans must be approved by the state regulator. People who had previously been told that their coverage would be cancelled must be given time to weigh their options. This is a months-long process but there are only six weeks left between now and January 1, when many of the current policies lapse.
This forces many families to make a difficult decision. Do they purchase a plan over the next few weeks to maintain coverage, even though that plan is more expensive or reduces access to their caregivers? Do they wait to buy insurance and risk a gap in coverage, expecting that their current plan will become available on acceptable terms? If they buy coverage now, will they be able to transfer to a better plan later?
The administration argues that the decision is easy: exchange coverage will be cheaper for most people. Even if that were true, the collapse of the federal healthcare.gov website has thus far prevented all but the most determined from purchasing coverage. That situation is unlikely to be resolved by the promised November 30 deadline.
But for many, exchange plans will not be less expensive. A Kaiser Family Foundation study finds that about half of people now buying their own insurance will be eligible for a tax credit. Perhaps another 20 percent will be eligible for Medicaid coverage. That leaves a third—about 5 million people—paying the full premium.
The Affordable Care Act changes the rules of the individual insurance market. Insurers can no longer reject applicants, and they can no longer charge higher premiums for those likely to incur above-average expenses. Moreover, all policies must now cover a wider array of services than typically available in the individual market.
That raises the cost of health insurance, and the money has to come from somewhere. The federal exchange subsidy only fills part of the hole, and only for some people. The rest is supposed to come from younger, healthier people whose premiums will be higher than their expected cost—and in many cases, substantially higher than they pay today.
This is what policymakers overlooked in enacting the ACA. Washington’s obsession with Congressional Budget Office scoring from the 50,000 foot level obscured the fact that many people would be harmed at the same time many people would be helped.
The president’s fix is too little too late. Complaints are coming from families living on tight budgets who have just discovered that they will pay more so that others can receive a subsidy. That is a hard truth that will not change by delaying the higher cost a year.