Obamacare ‘Fix’ Quiets a Political Storm, but Ignites a Policy One

The sharpest divide in reactions was between people focused on winning a tough election and people focused on the nitty-gritty of ACA reforms.

US President Barack Obama speaks on the Affordable Care Act in the Brady Press Briefing Room of the White House on November 14, 2013 in Washington, DC.
National Journal
Sam Baker
Nov. 14, 2013, 1:29 p.m.

Pres­id­ent Obama has a new of­fer to let people keep their health care plans. But for Obama­care to work well, it might be best if no one takes him up on it.

There’s no ques­tion Obama and con­gres­sion­al Demo­crats were tak­ing on wa­ter over the wave of can­cel­la­tion no­tices hit­ting con­sumers with in­di­vidu­al in­sur­ance policies. Demo­crats felt that they were on the hook for Obama’s “If you like your plan, you can keep it” pledge, even though Obama him­self has backed away from it.

Obama sought to tamp down the con­tro­versy with a pro­pos­al that will let in­sur­ance com­pan­ies un-can­cel their can­celed plans and con­tin­ue to of­fer them for an­oth­er year. It’s a policy an­swer to a mostly polit­ic­al prob­lem.

The sharpest di­vide in re­ac­tion to Obama’s an­nounce­ment Thursday was not between Re­pub­lic­ans and Demo­crats. It was between people fo­cused on win­ning a tough elec­tion and people fo­cused on the nitty-gritty mech­an­ics of the Af­ford­able Care Act’s re­forms.

Noth­ing put a finer point on that di­vi­sion than the re­ac­tion from state in­sur­ance reg­u­lat­ors. The in­sur­ance de­part­ment in sol­id-blue Wash­ing­ton state said it wouldn’t go along with Obama’s of­fer. In­surers there will not be al­lowed to un-can­cel their plans.

“I do not be­lieve his pro­pos­al is a good deal for the state of Wash­ing­ton,” state In­sur­ance Com­mis­sion­er Mike Kreidler said in a state­ment.

The Na­tion­al As­so­ci­ation of In­sur­ance Com­mis­sion­ers, which has helped im­ple­ment sev­er­al key pieces of the Af­ford­able Care Act, in­clud­ing its new in­sur­ance reg­u­la­tions and mar­ket­places, also said it was “con­cerned” by Obama’s pro­pos­al.

“This de­cision con­tin­ues dif­fer­ent rules for dif­fer­ent policies and threatens to un­der­mine the new mar­ket, and may lead to high­er premi­ums and mar­ket dis­rup­tions in 2014 and bey­ond,” the NA­IC said in a state­ment.

Obama’s an­nounce­ment ap­pears to have made some dif­fer­ence among skit­tish Demo­crats. The tone on Cap­it­ol Hill was no­tice­ably friend­li­er on Thursday than it had been on Wed­nes­day.

“I think it’s mov­ing in the right dir­ec­tion…. I didn’t think the tar­get was, ba­sic­ally, people that had in­sur­ance. It was to tar­get the people who were un­in­sured. So, I think they ac­know­ledged that,” Sen. Joe Manchin, D-W.Va., said as he left a closed-door meet­ing with White House of­fi­cials.

But there is a risk that this plan to al­le­vi­ate polit­ic­al pres­sure — if it works — could have neg­at­ive im­plic­a­tions for the policy frame­work of Obama­care.

The Af­ford­able Care Act did not cause in­sur­ance can­cel­la­tions by ac­ci­dent. It set new stand­ards for in­sur­ance plans and tried to move people in­to policies that met those stand­ards. A com­plic­ated, in­ter­con­nec­ted tangle of policies all serve the same goal: Build­ing a func­tion­al mar­ket­place for in­di­vidu­al cov­er­age, where sick people and healthy people are pooled to­geth­er.

Obama’s latest pro­pos­al, though, would let some healthy people stay out of the risk pool for an­oth­er year. That cer­tainly would help healthy and reas­on­ably wealthy in­di­vidu­als pay a lower premi­um — be­cause it’s an ex­ten­sion of the un­even mar­ket­place Obama­care was in­ten­ded to cor­rect.

It won’t al­low people to pur­chase new policies that don’t com­ply with the law, only to keep ex­ist­ing ones. And in­sur­ance com­pan­ies have already ad­jus­ted their busi­ness mod­els to sell com­pli­ant plans, so they might not even be in­ter­ested in re­viv­ing policies they have already can­celed, just for a year. Those factors could blunt any neg­at­ive ef­fects of Obama’s an­nounce­ment and mit­ig­ate the dam­age to the law’s ex­changes.

But if people take ad­vant­age of Obama’s plan, it could threaten the un­der­ly­ing struc­ture of Obama­care and cause premi­um hikes next year, the Amer­ic­an Academy of Ac­tu­ar­ies said.

“Chan­ging the ACA pro­vi­sions could al­ter the dy­nam­ics of the in­sur­ance mar­ket, cre­at­ing two par­al­lel mar­kets op­er­at­ing un­der dif­fer­ent rules, thereby threat­en­ing the vi­ab­il­ity of in­sur­ance mar­kets op­er­at­ing un­der the new rules,” said Cori Uc­cello, the Academy’s seni­or health fel­low.

That’s largely why in­sur­ance com­pan­ies were so angry over the pro­pos­al. They op­posed the Af­ford­able Care Act, but have com­plied with its re­quire­ments and ad­ap­ted their busi­ness mod­els to the law’s new in­sur­ance ex­changes. In­surers have cre­ated new plans that cov­er es­sen­tial health be­ne­fits, are avail­able to people with preex­ist­ing con­di­tions, and so on.

They’re count­ing on the same un­der­ly­ing dy­nam­ics as the White House. And now the White House is chip­ping away at those dy­nam­ics.

“Premi­ums have already been set for next year based on an as­sump­tion of when con­sumers will be trans­ition­ing to the new mar­ket­place,” Amer­ica’s Health In­sur­ance Plans said in a state­ment. “If now few­er young­er and health­i­er people choose to pur­chase cov­er­age in the ex­change, premi­ums will in­crease and there will be few­er choices for con­sumers.”

In short, Demo­crats are happy to have something to point to as a solu­tion. But state reg­u­lat­ors and in­surers don’t want to see that solu­tion make it very far in the real world.

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