November 19, 2013

Obama’s Fake Fixes, Special Deals, and Delays

Under extreme political pressure from his own party, President Obama reluctantly stepped into the White House briefing room last week to address the millions of Americans who lost their insurance plan due to the Democrats’ health care law. The President announced the Department of Health and Human Services will use its dubious administrative “enforcement discretion” to “fix” Obamacare by allowing some people buying health insurance in the individual market to keep their current plans.

President Obama’s maneuver is a desperate attempt at misdirection. Americans know the Administration issued a regulation setting specific criteria that health insurance plans had to meet in order to be “grandfathered” – or protected from Obamacare’s new rules and mandates. Senate Republicans tried to overturn this onerous regulation through a resolution offered by Sen. Mike Enzi, but Democrats voted in lockstep to keep it on the books.

The President and his party never intended to deliver on the promise that if people liked the health care plan they had, they could keep it. But as the public outrage over Obamacare’s cancellation notices reaches a fever pitch, and polls show the American people questioning the President’s integrity, Washington Democrats are running for cover. Ignoring the President’s veto threat, 39 House Democrats supported legislation allowing Americans to keep their old health care plans. Over the weekend, House Democrat leadership, including Minority Leader Nancy Pelosi and Assistant Minority Leader James Clyburn, tried to downplay the vote, but Washington Democrats are clearly in a panic.

President Obama’s Fake Fix

The White House proposal contains three components:

  • Renders Insurance Companies Liable. It gives insurance companies the option to rescind policy cancellation notices, allow affected people to keep their current policy for one additional year, and exempt these insurance policies from Obamacare’s restrictive benefit mandates. Insurers can only re-enroll people whose plans will be cancelled in 2014 – the companies cannot sell those policies to new customers.
  • Mandates Free Obamacare Advertisements. It requires insurance companies renewing old policies to inform consumers about all the differences between the plan benefits and what the benefits would be if it were compliant with Obamacare.
  • Modifies Risk Corridor. Obamacare included a risk corridor program to collect money from insurance companies that pay lower-than-expected patient claims in a given year and redistribute the money to plans with higher-than-expected claims. Because insurers are putting forward new plans in 2014, and pricing them before consumers enroll, the companies may have trouble setting accurate premiums. The President proposed adjusting Obamacare’s risk corridor to mitigate possible effects on premiums.

A Political Band-Aid to a Political Problem

The Obama Administration’s proposed fix does little to help Americans who have lost their health insurance plans. USA Today’s editorial board called out the President, writing: “political necessity doesn’t guarantee good policy, and the president’s plan is less a solution than it is a punt.” The Administration’s proposal simply shifts blame to the insurance companies.

For more than three years, insurance companies implemented plans to move customers into policies that comply with Obamacare’s new rules and health benefit mandates. Insurers expected -- because the Administration demanded -- that any plan failing to meet the health care law’s strict requirements would be phased out of the market in 2014.

“There is less reprieve here than Mr. Obama claims. It’s hard to un-cancel insurance. The rules Mr. Obama is repudiating were written in 2010, and insurers have been adapting to them for years.” – Wall Street Journal, 11/17/13

Insurers cannot suddenly wave a magic wand and renew old customer plans. Even if a company wanted to reinstate cancelled plans for one year, it would take a herculean administrative effort to make it happen. Insurance companies have approximately one month to:

  • Renegotiate old provider and hospital network contracts;
  • Engage state regulatory oversight officials and begin the plan approval process;
  • Configure computer systems to capture correct policies, rates, and eligibility;
  • Perform new actuarial calculations;
  • Update billing cycles;
  • Send new letters notifying people about their options;
  • Give people time to review their options and make a decision;
  • Reenter final consumer decisions into computer systems without generating billing, claim, and eligibility errors.

One thing is clear: the President’s Obamacare fix could do more harm than good. The National Association of Insurance Commissioners said the White House announcement “threatens to undermine the new market, and may lead to higher premiums and market disruptions in 2014 and beyond … Changing the rules through administrative action at this late date creates uncertainty and may not address the underlying issues.”

The American Academy of Actuaries warned the Administration’s action may cause “higher average medical spending among those purchasing new coverage, additional program costs for the federal government, and higher health insurance premiums in 2015.” The increased costs could be paid for by Obamacare’s risk corridor program, which some have called a “bailout.”

Finally, America’s Health Insurance Plans cautioned, “Premiums have already been set for next year based on an assumption of when consumers will be transitioning to the new marketplace. 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.”

Administration Special Deals and Delays

Implementation of the President’s law has been marked by a disturbing pattern of delays, missed deadlines, broken promises, special deals, and exclusive waivers. In September, the Congressional Research Service calculated that President Obama has signed 14 laws that amend, rescind, or repeal components of his health care law. The Obama Administration also delayed at least five key provisions of the law by administrative fiat.

  • Consumer out-of-pocket costs cap delayed.
  • Employer mandate and reporting requirements delayed.
  • Consumer income and health insurance status verification requirements slashed.
  • Final coverage contracts with insurance plans selling in the federal exchange delayed.
  • Employers’ required exchange notifications delayed.
  • Small Business Health Options Program (SHOP) delayed.
  • Employee auto enrollment provision delayed.
  • HHS gives some states waivers to avoid Medical Loss Ratio requirements.
  • Early Retiree Reinsurance Program closed after running out of money two years early. HHS admits using it as a slush fund for state and local governments and labor unions.
  • HHS stops enrolling patients in the temporary federal high risk pool – even with lower than projected enrollment, the program ran out of money.
  • HHS admits the Community Living Assistance Services and Supports program cannot be implemented, and Congress repeals it.
  • Annual benefit limit mandates force some employers to consider dropping insurance coverage or raise premiums. Administration creates a temporary waiver program to prevent cost increases and fewer insurance choices.

President Obama’s latest delay is not the first – nor the last – regulatory rewrite by the Administration to try to hide Obamacare’s negative effects. But all the President’s unilateral administrative maneuvers can’t fix the health care law’s intrinsic flaws -- Obamacare is too big and complex for that. No small fix changes the fact that Americans are losing the plans they had and liked, they are losing their doctors, many are paying more for their coverage, and some are being forced to buy policies that they simply don’t want or need. Starting over is the only answer.

Issue Tag: Health Care