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Obamacare: A Law or a Shakedown?

obama_tears_up_contract_big_11-21-13-1 I am altering the deal. Pray I don't alter it further.

Late last week, the Obama administration made a series of “requests” to insurance companies that are participating in the new exchanges, federal or state, as well as those companies processing renewal requests for individual insurance policies that were initially cancelled and may now be renewed in those states where the state insurance commissioner has given the OK.

These "requests" follow a series of retreats from deadlines established at the time the Affordable Care Act was passed in 2010. These include:

    1. delaying the employer mandate for a year;
    2. delaying the end of the sign-up period for coverage beginning January 1;
    3. delaying the introduction of the Spanish language website;
    4. delaying small business online enrollment for a year;
    5. delaying the beginning of the enrollment period for 2015 until mid-November so that it follows the 2014 midterms (a delay selected so that voters do not get to see the large premium increases that almost certainly will be coming in the second year); and
    6. allowing insurance companies to reinstate cancelled policies that had been judged non-compliant with Obamacare mandates or “grandfathering corridors."

The latest "requests" may seem in some way to be more of the same and, if anything, less burdensome since they are requests rather than official delays or changes in policies, and are described as nothing more than a few suggestions to ease the transition to the new coverage.

There is another way, however, to see the latest “fixes” that the Obama administration is requesting from the insurance companies, and that is to view them as something far removed from business as usual. The purpose of the requests, as with all of the delays and policy changes to date, is a fairly obvious attempt to shift blame away from the law itself and the president and members of the Democratic Party who drafted the law, promoted it, voted for it, and defended it every step of the way.

The obvious fall guys for the Obama administration are the insurance companies. These firms have never been popular, but they bought into supporting the new law because it promised them 20 million new enrollees on the exchanges, with a public utility model that ensured a certain level of profit for the new policies. The companies are now learning that they are not independent players anymore, free to set prices and conditions for coverage that are consistent with the law that was passed and for which they, unlike the administration, had planned. They are, it seems, now at the whim and mercy of a politically deflated president who needs the insurance companies to change their way of doing business from month to month -- this time to prevent a January rollout fiasco when coverage is scheduled to begin for those who have supposedly signed up.

In essence, the Obama administration is now demanding that insurance companies provide free care to those who have not paid for their policies or to those who think they have paid but whose payment or enrollment information never made it to the insurance company. The insurers are being “asked” to backdate the coverage date for new policies to the beginning of the month for those who pay sometime during the month, even if only a partial payment is made.

Tales of people showing up at the doctor’s office or hospital or filling prescriptions thinking they are insured, and instead finding out that they are uninsured, would simply compound the negativism about the new law that  hardened after the calamitous website failure in October and November. The Obama administration wants to turn the corner on the public image of Obamacare, and if many design flaws remain, then they can try to make believe that problems no longer exist by having insurance companies behave as if those who have not paid or enrolled are in fact fully on board with the program.

The changes that are  incorporated in the latest requests are described as a one-month corrective due to the problems getting the Healthcare.gov site to  function and amidst stories of very high rates of misinformation (25%) being transmitted to insurers. But in fact, the insurers may well be asked to continue such policies in future months, and the request is hardly voluntary, since the companies are warned that they may be barred from participation in the exchanges if they do not comply!

HHS says the new rules are only suggestions to ensure "a more seamless transition," but there's nothing voluntary here. The regulatory fine print reveals that HHS intends to kick insurers off the exchanges if they don't obey. Having destroyed the old individual market, HHS will only certify the new "qualified health plans" if insurers "adopt policies to prevent disruptions in treatment of episodes of care."

The Wall Street Journal article notes that the requests not only include providing coverage to those who have not paid or who have only partially paid, but to treat out-of-network providers as in-network during the transition.  Many of those who have navigated the exchanges have discovered that the lower-cost plans routinely require large deductibles and include narrow networks of providers -- generally without teaching and specialty hospitals, and the physicians who work with them. Many plans provide no payment for out-of-network providers.

The broader PPO-type networks are far more expensive options and they also include high deductibles. Among the 6 million who were told their policies were cancelled, some will be able to have one more year with these plans, though insurers have yet to price the renewals, preventing people from comparing exchange plans with their current plans. For those who are buying insurance for the first time or after a lapse in coverage, the initial website problems and now the combination of high deductibles, high premiums, and narrow networks may well be an excuse to continue as uninsured for one more year, given how modest the penalties are for failure to enroll.

The press continues to report that the young are being asked to subsidize the older, sicker patients in the new exchanges. But if this is so, you would not know it in Illinois, where 50-year-old women will need to pay at least $4,000  a year in premiums for the lowest-cost bronze plan ($6,000 in annual deductibles) with a very narrow network of providers. Plans with lower deductibles or broader networks cost thousands more per year in premiums. In other words, an enrollee will be out $10,000 a year before seeing a dollar in coverage (annualizing the premium). This is, again, the low-cost plan that is presumably being subsidized by younger enrollees!

Roughly 350,000 people have completed enrollment online for the exchanges in the 50 states in October and November (a pace far below the first twelve-month estimate of 7 million), and insurers estimate that half of this number are among the pool of six million who had their policies cancelled and who needed to find new coverage.  Many of those who had policies cancelled are in states where renewal of those plans has been denied by the state insurance commissioner. It is likely that even with an estimate of 800,000 new Medicaid recipients in October and November, and a few hundred thousand more signups for both the exchanges and Medicaid in December, on January 1 there will be fewer Americans with insurance coverage than was the case on October 1, 2013.  This is where we will be three months after the implementation of the president’s signature achievement, for which the Obama team had three and a half years to prepare.

The left, which has been demanding universal coverage for decades, is now forced to defend the indefensible, since to admit failure or acknowledge widespread government incompetence would be to abandon not only their leader but his and their “achievement." So we will continue to have a government which lawlessly makes it up as they go along and hopes the country can be distracted. Meanwhile, the left and its mouthpieces will proclaim that all is well.