• 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.


    • “If you change the ACA for political purposes, there is a cost, both financially and argumentatively.”

      Well said. However, the design of the law itself is a result of the political process. So has been its implementation (which famously contributed to the healthcare.gov management failure and delayed regulations).

      The Administration is betting – like the earlier extension of individual plans – that the political benefits (in this case avoiding horrible press after January 1 when some people could claim they lost their old coverage and can’t afford a new one but are being forced to pay a tax penalty) is worth it, while the policy downsides are relatively minor (since people who had insurance before are likely to want insurance in the future).

      In short, like its design, the implementation of a politically contentious law has been political. As long as the Administration is “changing things on the fly” in service of the larger goal of expanded, affordable coverage for millions is achieved, they may be forgiven.

    • I think you pretty much nailed it, Dr. Carroll. The catastrophic plans are cheaper in general, but not by that much. The savings are more real than I think you give credit, though – yes the deductible is a bit higher than the Bronze plans (although barely in some cases – I think it was in Oregon that I saw a Bronze plan with a $6,300 deductible), but most people will never get close to their deductible so it’s not going to be an issue. And the benefits aren’t that much different either, the lower premiums have more to do with the healthier risk pool.

      Which raises one issue (well, many issues, but let’s just stick with this one): in the next several months, insurers are going to begin making their calculations for 2015 premiums. The administration’s actions here have added (or amplified) one more major issue insurers will have to contend with in setting those rates. Every single insurer is going to be asking themselves: what else will the administration spring on us in November 2014, December 2014, that will add to our costs? And is the risk and uncertainty worth it?

      I suspect you’re going to have a number of insurers looking at certain markets and deciding that for 3,000 people in Arkansas, or 7,000 policyholders in Montana, it just isn’t worth the aggravation and risk of pricing a product that will be underpriced and a money-loser before it even is launched because the White House decided they needed to make some additional accommodation, change, adjustment, correction, fix, etc.

      The happiest people in America today might just be those insurance execs who decided to sit out the individual market in 2014 in most states and look at expanding their offerings in 2015. My guess, the decision to skip 2015 as well has just been finalized in the past 24 hours as a result of this move.

    • Congressional democrats are freaking out. It’s as simple as that b

    • I don’t think this is that big of a deal. How many people have had there policies canceled and haven’t bought a plan that complies with the ACA?

      These people bought insurance before the mandate so they value having insurance coverage and will likely buy without the mandate. Some will opt for catastrophic plans, but how many would really do it when a bronze plan is just a little bit more?

      I think the policy and financial costs for this are minimal and this is mostly about the Obama administration providing themselves political cover. It might backfire politically, but I really doubt it will make a difference one way or another.

    • If I had worthless junk insurance, and my policy was cancelled, I now can buy catastrophic insurance or no insurance. But my neighbor who was smart enough not to waste her money on junk insurance and couldn’t afford real insurance has to buy regular, non-catastrophic insurance even if she wants catastrophic insurance instead. And this is fair because why?

      This looks like random flailing on the part of the Administration.

      The HHS letter and the Sebelius letter announcing the policy are ambiguous. In order to buy catastrophic or no insurance, the person has to get a hardship exemption. The letters are unclear about whether the hardship is merely that the insurance was cancelled and the person SAYS replacement insurance would be unaffordable, or whether they have to prove that the new insurance actually IS unaffordable for them.

      Letter from Sebelius:

      HHS memo:

    • I wonder if anyone has calculations for what it costs in sheer aggravation, time, risk, confusion, stress for Americans to have private insurance.

      It takes such time and effort to look at policies, gauge future health concerns, understand co insurance and co pays versus premiums, check on who is in the network, HMO versus PPO etc. There is risk associated with making the wrong decision.

      You can spend weeks researching everything and still end up being surprised that a surgeon or a nurse or a radiologist in your in-network hospital is not in your insurance network at the time you received their services. Then you are left dealing with balance billing.

      Is this really worth it? Aggravation, stress, risk, time, effort and per capita costs that are twice that of other industrialized countries. This is not worth it.

      I think single payer can get traction even if it is state-by-state. It is certainly worth a try.

      The insurance company says you have to call them before seeing a new doctor to make sure they are currently (could have just cancelled the contract yesterday) in network. The urgent care clinic says that you will not know which doctor you will see until you actually see them.

      So, you are supposed to stop at the door of the exam room, ask the doctor their name and call your insurance company to make sure they are currently in network. This is ridiculous but it actually happened.

      I believe that if you are unconscious this is not required.

    • I am a libertarian but I think that the PPACA would be OK if they did the following things:

      1. Get rid of all employer mandates. It seems crazy to me to push employers to provide health insurance and even crazy to then exempt some employers (with fewer than 50 employees) and employees(part time)!
      2. Allow much higher deductibles say up to $50,000/year.
      3. Get rid of the 3 to 1 age premium cap.
      4. Get rid of the mandates to cover things like birth control and pregnancy or anything else under the deductible.

      Those were all put in PPACA for purely political reasons. The whole thing is very political. Only the individual mandate, medicaid expansion and subsidies were to benefit the poor rather than get votes.