Changing the ACA on the fly

Two things in just the last day or so. First, no individual mandate for people whose plans were cancelled. Nick already covered the legality of this. I’m concerned about the policy implications. Namely the following:

  1. It’s difficult for insurance companies to predict who will sign up for insurance and how much they think it will cost to cover them. They spent a lot of time figuring this out for 2014. Every time the administration changes the rules, it changes their calculations. As we’ve discussed, the mandate is there to induce healthy people to buy insurance. Every time you make an exemption, you likely make the risk pool a bit more unhealthy. This will screw up the insurance company calculations.
  2. Insurers will likely want to widen the risk corridors. I don’t see how the Obama administration can say no to this. They’re the cause of the added risk. We, as tax payers, will pick up the cost.
  3. This also makes the political case for the mandate much weaker. If you’re going to say that people who are newly uninsured are a “hardship”, how do you respond to claims that people who have been uninsured for longer aren’t under a “hardship”? Is being uninsured a reason to be exempt from the mandate? If so, this whole thing is screwed.

The second development is that catastrophic plans are now available for people who had their plans cancelled recently. These types of plans are cheaper than others in the exchanges, but have limited benefits. They cover a limited number of primary care visits a year and some basic preventive stuff – but that’s it. You’re likely on the hook for everything else until you hit the out-of-pocket maximum. My thoughts:

  1. Ho hum? If you look at Indiana, there are catastrophic plans available for around $200 a month. There are bronze plans available for about $35 more a month that have almost the exact same benefits. What you save in premiums is almost replaced exactly by lower out-of-pocket maximums. I know everyone has been complaining that Obamacare eliminated HDHPs, but the bronze plans are pretty much those.
  2. Again, this screws up the insurer calculations. They thought only under 30s would be in those plans, and most of them are healthy. This will potentially worsen the risk pool.
  3. Again, this weakens the argument for holding catastrophic plans only to people under 30. If newly uninsured 40 year olds should be allowed to get them, why not people who’ve been uninsured for longer?

If you change the ACA for political purposes, there is a cost, both financially and argumentatively. If the principles that hold it together were true before, then weakening them in this way should not be something the administration does lightly.


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