Why Obama's latest ObamaCare fix won't solve anything
With the political heat rising over a glitchy website, broken promises, and canceled health insurance plans, President Barack Obama announced a fix on Thursday that would allow people to keep their old health plans for another year, even if they don't meet ObamaCare's new stricter standards.
The problem? It's up to insurers to decide whether they want to renew these plans — and many of them don't sound too happy about it.
"This doesn't change anything other than force insurers to be the political flack jackets for the administration," a health insurance industry "insider" told BuzzFeed. "So now when we don't offer these policies the White House can say it's the insurers doing this and not being flexible."
Over and over again, for several years, the president had publicly vowed, "If you like your health plan, you can keep it." That turned out to be untrue. Many Americans who purchase insurance through the individual market have received cancelation notices, as insurers scrap substandard plans that don't live up to ObamaCare's higher standards. Indeed, some 7 million people may be forced to switch health insurance plans because they fail to offer "essential benefits" like prescription drug coverage, maternity care, or mental health services.
Many of these middle-class, self-employed people who don't qualify for ObamaCare's subsidies have gone public with horror stories about skyrocketing premiums. Republicans have trumpeted these anecdotes to declare ObamaCare a failure. Democrats, with an eye toward 2014, have started distancing themselves from the law. Even The Daily Show is piling on the president.
So today, Obama backpedaled, allowing insurance companies to temporarily offer people the plans that otherwise would have been canceled.
Problem fixed, right? Nope. Pretty much nothing will change. The reality of the situation, as New York's Jonathan Chait put it, is that "everybody — the insurance companies, members of Congress, and Obama — is bullshitting."
Obama gets some political cover. And Democrats in Congress get to ease back on their criticism, whether they ever really meant it or not.
To wit: Earlier this week, Senate Majority Whip Dick Durbin (D-Ill.) said he was so disappointed in Obama that he was ready to work with Republicans to create a law that would let people keep their insurance. Now, apparently, everything is okay.
MT @jonathanweisman: Obama's ACA play worked: Dick Durbin emerges from WH briefing to say no legislation needed to fix dropped insurance.
— Garance Franke-Ruta (@thegarance) November 14, 2013
Meanwhile, insurance companies are crying foul. America's Health Insurance Plans (AHIP), a trade group that represents the health insurance industry, even quoted one of its liberal critics to make a point.
"@ezraklein: Insurer have done plenty wrong, but now they're getting punished for ending discrimination against preexisting conditions"
— AHIP Coverage (@AHIPCoverage) November 14, 2013
Here's the problem: Insurers say it's too late to renew plans that they have already canceled specifically because the federal government told them that they weren't comprehensive enough. Insurers drew up their business strategies with ObamaCare's rules in mind. It' snot easy for them to turn on a dime. And even if they can renew someone's old coverage now, they will have to do so with a letter explaining all of the benefits that the person is missing out on because they didn't choose an ObamaCare-sanctioned plan.
That isn't exactly great for PR. On the other hand, if they don't renew people's old coverage, they start getting some of the blame that was previously being directed at Obama. That puts them in a difficult spot, writes The New Republic's Jonathan Cohn:
The unknown here is whether insurers will revisit and renew policies they already canceled. Insurance industry officials I've consulted don't seem terribly interested in doing that: It turns out to be way more complicated than most people realize. Restarting a canceled plan would take time and work, at a time when carriers are trying to restructure their options to maximize profits given the new consumers seeking coverage. If insurers thought renewing a policy was a worthwhile effort, chances are good they would have taken advantage of the existing authority to do so. [New Republic]
So in the short-run, nothing much changes for consumers. Either their plans still get canceled because insurance companies don't want to renew them, or people only delay the inevitable plan switch for a single year. The long-term effects for ObamaCare, however, could be pretty bad.
The whole point of the new "essential benefits" standard was to spread the cost and risk around evenly. Now, as The Washington Post's Sarah Kliff notes, "healthier people are more likely to stay in these pre-ObamaCare plans" because "they're probably more okay with a skimpier benefit package."
If ObamaCare-sanctioned plans become overloaded with elderly, sick people, the whole system could collapse under its own bloated, expensive weight. That would potentially be a far worse situation than some people complaining about not being able to keep their old insurance plans.