“Like your plan, keep your plan.” President Obama’s famous mantra now threatens the centerpiece of his legacy, and the stakes are so high that he’s diluting the Affordable Care Act to save it. Beset by angry consumers, disillusioned allies and newly empowered critics, the president announced Thursday that he will now honor his false promise, at least temporarily, by letting insurance companies reinstate several million health plans they have canceled to comply with the health care law.
The president’s new policy—an administrative rule that requires no legislative approval—charts a middle course between Democratic and Republican bills now circulating in Congress. The rule allows insurers to renew substandard insurance policies if subscribers want to keep them, but it bars the sale of new substandard policies, and the loophole expires in a year unless the administration decides to extend it.
The plan sounds innocuous, but that’s about its only advantage. It creates a no-win dilemma for insurers. And while it may mollify consumers who want to renew their old policies, it could ultimately raise insurance costs by keeping young people out of the new health care exchanges.
Passing the buck
By “allowing” insurers to reinstate health plans they’ve canceled, the administration effectively hands them the president’s problem. “Whether an individual can keep their current plan will . . . depend on their insurance company and state insurance commissioner,” the White House explains in a fact sheet. “It will no longer be implementation of the law that is forcing them to buy a new plan.” In other words, don’t blame us if your insurance company canceled your plan to comply with the health care law. The cancellation is now voluntary!
The insurance industry isn’t clamoring to revive the market for junk health plans. It has spent the past two years building a new business model, premised on the assumption that the young, healthy people who bought those plans will now buy higher-quality coverage through the exchanges. Insurers have no incentive to move potential customers back into their old plans. But they’ll now be the villains if they go ahead with the policy cancellations.
With just a few weeks remaining before the health care law takes full effect, insurers may not even have time to revive the old plans—a process that would involve recalculating rates and eligibility and communicating directly with millions of customers. “It is unclear how, as a practical matter, the changes proposed today by the President can be put into effect,” the National Association of Insurance Commissioners said in a statement. “In many states, cancellation notices have already gone out to policyholders and rates and plans have already been approved for 2014.”
Delaying the inevitable
Assume for a moment that President Obama strikes gold with this scheme—that insurers manage to reinstate the canceled policies and the angry consumers all manage to re-enroll. In this scenario, Congressional Democrats return safely to the fold, Bill Clinton stops undermining the president, and the broken federal website reclaims its status as the greatest threat to health care reform.
But not for long. Within a few months, the administration will have to decide whether to extend its “transitional policy” beyond 2014. If the loophole closes, we’re right back to where we are today—policyholders furious, opponents energized and allies defecting in droves. But if the president extends the grace period, he could undermine the whole Obamacare enterprise.
For all their unresolved challenges, the new insurance exchanges are offering better coverage at lower rates than individual consumers have seen for decades in this country. That’s due partly to the expected influx of healthy young subscribers. The current rates reflect an assumption that millions of them will buy fully qualified health plans this year, as the individual mandate kicks in and substandard health plans expire.
What happens if the old plans don’t expire?
“Premiums have already been set for next year based on an assumption of when consumers will be transitioning to the new marketplace,” the trade association 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.”
The insurers may well spare us this mess. They routinely drop policies as their own needs change, and they’re used to affronting their customers. If it suits their interests, chances are they’ll kill the old health plans, take the heat and move on. A president with a stiffer spine would have done the same thing.
Geoffrey Cowley