Why Delaying Obamacare Has Insurers Freaking Out

The individual mandate and enrollment periods need to work as planned or consumers could face rate shock.

A woman looks at the HealthCare.gov insurance exchange internet site Oct. 1, 2013.
National Journal
Sam Baker
Oct. 31, 2013, 1 a.m.

The health in­sur­ance in­dustry already had plenty to freak out about with the im­ple­ment­a­tion of the Af­ford­able Care Act. Simply com­ply­ing with the law is a massive un­der­tak­ing, nev­er mind the ter­rible Health­Care.gov de­but. But the botched rol­lout has pro­duced a new source of anxi­ety for in­surers: the grow­ing bi­par­tis­an sup­port for delay­ing parts of the act’s im­ple­ment­a­tion.

Re­pub­lic­ans have wanted to delay the law’s in­di­vidu­al in­sur­ance man­date for years. They’ve voted on it in the House, and Sen. Marco Ru­bio, R-Fla., is keep­ing the idea alive in the up­per cham­ber. Delay­ing the man­date would be ter­rible news for in­sur­ance com­pan­ies, but so far they haven’t had to take a strong po­s­i­tion on most of the GOP’s pro­pos­als. They have been count­ing on polit­ic­al grid­lock to take care of the is­sue: A delay wouldn’t hap­pen, so in­surers didn’t have to break with their anti-Obama­care al­lies or pub­licly side with pro-Obama­care Demo­crats on the is­sue.

That tone is chan­ging, though, in the wake of Health­Care.gov’s woes. Sen. Joe Manchin, D-W.Va., is work­ing on a bi­par­tis­an bill to delay the in­di­vidu­al man­date for a year, a move that has set off alarms in­side the in­dustry. “The in­di­vidu­al man­date is in­ex­tric­ably linked to the in­sur­ance-mar­ket re­forms in­cluded in the health care re­form law,” said Robert Zirkel­bach, a spokes­man for Amer­ica’s Health In­sur­ance Plans, the in­dustry’s lead­ing trade or­gan­iz­a­tion.

The health care law es­sen­tially strikes a deal with in­sur­ance com­pan­ies: They are re­quired to cov­er people with preex­ist­ing con­di­tions, and they can’t charge people more based on those con­di­tions. Both of those policies will cost in­surers money — po­ten­tially, a lot of it. So the law also in­cludes three tools to min­im­ize their fin­an­cial risks: the in­di­vidu­al man­date; sub­sidies to help people af­ford in­sur­ance; and a defined win­dow to buy cov­er­age.

If law­makers start fid­dling with those in­cent­ives, the equa­tion gets worse for in­surers. There are minor changes that the in­dustry could prob­ably weath­er, maybe eas­ily. But just the idea of weak­en­ing those safe­guards is enough to make in­surers nervous. A hand­ful of states tried in the 1990s to en­force guar­an­teed cov­er­age, but without the safe­guards that Obama­care in­cludes for in­surers. Premi­ums in those states skyrock­eted, grow­ing by double di­gits each year un­til they were so ex­pens­ive that the re­forms ended up in­creas­ing the num­ber of un­in­sured people.

Demo­crats pro­tect­ive of the Af­ford­able Care Act have held the line so far on changes to its im­port­ant pro­vi­sions. The in­di­vidu­al man­date might not be polit­ic­ally pop­u­lar, but Obama­care won’t work without it, so the party was stuck with it. That put Demo­crats and in­surers on the same team.

This un­enthu­si­ast­ic al­li­ance is start­ing to weak­en now be­cause of the web­site’s short­falls. The site’s myri­ad tech­nic­al prob­lems have made it su­premely dif­fi­cult for any­one to shop for cov­er­age, much less en­roll in a plan. Some Demo­crats see those fail­ings as a bur­den on con­sumers and ar­gue that it’s only fair to give people a break from the law’s oth­er re­quire­ments.

A delay in the in­di­vidu­al man­date re­mains un­likely, even though it’s get­ting fresh at­ten­tion on Cap­it­ol Hill. But in­surers are also wor­ried about an­oth­er pro­pos­al that’s at­tract­ing Demo­crat­ic sup­port bey­ond the mod­er­ate, per­en­ni­ally vul­ner­able Joe Manchins of the world.

Sen. Jeanne Shaheen, D-N.H., is lead­ing a push to ex­tend the open en­roll­ment peri­od — the six-month win­dow dur­ing which con­sumers are able to buy cov­er­age through the law’s new in­sur­ance mar­ket­places. The win­dow opened Oct. 1 and runs to March 31.

Yet if en­roll­ment wasn’t avail­able for one or two of those six months, Shaheen ar­gues, Wash­ing­ton should add an­oth­er month or two on the end, to give people the full win­dow.

“Ex­tend­ing this peri­od will give con­sumers crit­ic­al time in which to be­come fa­mil­i­ar with the web­site and choose a plan that is best for them,” Shaheen wrote in a re­cent let­ter to Health and Hu­man Ser­vices Sec­ret­ary Kath­leen Se­beli­us. “In­di­vidu­als should not be pen­al­ized for lack of cov­er­age if they are un­able to pur­chase health in­sur­ance due to tech­nic­al prob­lems.”

Al­though it sounds like a minor ad­just­ment, the fact that there’s a defined open-en­roll­ment peri­od is a big deal for in­sur­ance com­pan­ies. Ex­tend­ing the win­dow would be “destabil­iz­ing” for in­surers, Zirkel­bach said.

Their primary goal is to cov­er as many people as pos­sible who won’t file big claims. It’s the defined en­roll­ment win­dow, not the in­di­vidu­al man­date, that pre­vents people from wait­ing to sign up for in­sur­ance un­til they’re on their way to the emer­gency room. So ex­tend­ing the win­dow could make it easi­er for young, healthy people to go without in­sur­ance un­til they ab­so­lutely need it. “If these vi­tal en­roll­ment in­cent­ives were to change, the premi­ums health plans filed for next year would have to in­crease,” Zirkel­bach said.

Wheth­er Con­gress or the ad­min­is­tra­tion will ac­tu­ally try to weak­en the man­date or ex­tend the en­roll­ment win­dow de­pends largely on wheth­er and when Health­Care.gov is fixed. If HHS meets its end-of-Novem­ber dead­line, everything can prob­ably con­tin­ue as sched­uled.

“Un­less there is far more dis­aster than the ad­min­is­tra­tion is ad­mit­ting right now, it would be a really bad idea to delay and cause more prob­lems for in­surers nervous already about what kind of risk pool they’re draw­ing from,” said Tim Jost, a Wash­ing­ton and Lee Uni­versity law pro­fess­or and a sup­port­er of the Af­ford­able Care Act.

But if people still can’t sign up for cov­er­age as we get closer to Dec. 15 — the dead­line to buy a plan that takes ef­fect at the be­gin­ning of the year — the calls for delays will get a lot louder.

“I don’t see what oth­er choice the ad­min would have,” said Dan Schuyler, who tracks the health law’s ex­changes for the con­sult­ing firm Leav­itt Part­ners. If not enough young people en­roll, he said, “I don’t think there’s any oth­er al­tern­at­ive but to ex­tend open en­roll­ment an­oth­er 30 or 60 days.” 

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