10/24/2013 @ 5:09AM
After Insurance Industry Pow-Wow, White House Delays Obamacare's Individual Mandate By Six Weeks
Yesterday afternoon, chief executives of 12 major health insurers—including Aetna, Humana, WellPoint, and Kaiser Permanente—trudged to the White House to “discuss…ongoing implementation of the Affordable Care Act.” The meeting was off the record, but we have a pretty good idea of what happened. Insurers were likely to urge the White House to delay the implementation of Obamacare’s exchanges until the website, Healthcare.gov, gets fixed. And it appears they got their wish. Last night, the White House confirmed that it intends to delay the enforcement of the individual mandate by as much as six weeks.
“The White House is meeting with insurance industry executives,” a consultant to insurers told Ezra Klein, “and I can tell you what they’re talking about. [They’re saying] you need to get this fixed, because you’re setting us up for a real fall with our customers. [Patients are] not going to blame Kathleen Sebelius if they walk into their doctor’s office and the doctor doesn’t know who they are. They’ll blame the insurance company. And I’m sure what the insurers are telling the White House today is we will not let you put us in that position.”
I recently spoke to one of those CEOs, Bruce Broussard of Humana, at the Forbes Healthcare Summit. Broussard expressed optimism that the website would eventually get fixed. But he was more cautious about whether or not healthy and young people will pay lots more for health insurance in order to subsidize other people.
“The exchanges probably are a good thing,” says Broussard. “It’s expanding coverage for people, and we think that in the long run it will be the right thing to do. In the short run, it’s got some bumps, and the industry and the government expected that. But we are focused on fixing those bumps, and to work with the government to make it both a good experience [while] driving down health care costs and improving the quality.”
We know that sick people will sign up, because the law heavily subsidizes coverage for them. But will other people? “The verdict’s out on that, to be honest with you…the federal government and the states are trying to stimulate more and more people to sign up. I think as the penalty increases for not having insurance, probably you will see more people sign up. But in the short run, it could be [sicker] people that just need coverage.”
The website problems carry the risk of making this problem, called adverse selection, worse. People who really need coverage because they have health problems will put up with the hassles of enrolling in Obamacare’s exchanges. Younger and healthier people may not. If only older and sicker people sign up for coverage, the plans on the exchanges will end up becoming more expensive, and less affordable, for everyone else.
That’s why, among the major for-profit insurers, there has been a wide dispersion in participation in Obamacare’s exchanges. An analysis by Justin Lake of J.P. Morgan indicates that Aetna has most aggressively jumped in among the for-profit players; even then, Aetna’s products cover only 55 percent of the exchange-eligible uninsured population nationwide. Humana is second at 39 percent. At the other end is UnitedHealth, which has declined to participate in any of the exchanges.
White House unilaterally delays individual mandate
So here’s what the White House did, according to Sarah Kliff of the Washington Post. Earlier, in response to an inquiry from tax-preparer Jackson Hewitt, the administration said that Americans needed to buy health insurance by February 15 in order to avoid the individual mandate’s fine against those who go without coverage. The “open enrollment” period in 2014, however, during which you can buy coverage and still gain access to Obamacare’s provisions regarding pre-existing conditions, ends on March 31.
So the White House decided that it would move the deadline for buying insurance back to March 31, even if that means people went without coverage through April, because it takes time for an “enrollment” to turn into actual coverage from an insurer.
It’s not clear what legal justification the White House is using for its unilateral delay of the individual mandate, but the Affordable Care Act contains many loopholes and exceptions that give the Department of Health and Human Services power to selectively enforce the law. Earlier this summer, the GOP-controlled House of Representatives passed a one-year delay of the individual mandate, but that bill died in the Democrat-controlled Senate.
Insurers want to strengthen the individual mandate
Insurers may be happy that forced enrollment in the exchanges is being pushed back for a bit. But over the long term, insurers actually want to strengthen the individual mandate, and have been lobbying the White House to that end. They’re concerned that the individual mandate is too weak.At the Forbes Healthcare Summit, retired Aetna CEO Ron Williams forcefully made the case for a stronger mandate, because he thinks that healthy and young people will not otherwise be interested in buying the costly coverage that is on offer under Obamacare.
“I’m probably somewhat pessimistic,” says Williams. “I think that young people tend to believe that they are immortal and invincible at that stage of life, and I think its going to take a while to create that kind of societal norm and perhaps even a few stop lights here and there, that says, gee if you want a student loan, or you want to apply for this, you want to do that, you have to actually demonstrate that you actually have insurance. That’s a debate we haven’t had as to whether we think that’s an appropriate approach to move a little bit from a carrot to maybe a little bit of a frozen carrot.”The mandate in its current form, Williams says, “really does not represent much of an incentive or disincentive for people to sign up.” In 2016 or 2017, he thinks, Congress will be forced to stiffen the mandate in order to combat the fact that only sicker and older people are signing up.Why not try to make insurance affordable instead?
Here’s an alternative approach. Instead of forcing people to buy an unaffordable product that they don’t want, why don’t we instead allow insurers to sell coverage that people actually want to buy on their own? It wouldn’t be that hard. If you weed out all of the senseless bureaucratic directives contained in Obamacare, you could offer inexpensive plans that young and healthy people would be happy to buy.
But that’s not the Obamacare way. The Obamacare way is to empower the government to tell you what kind of insurance you have to buy, and then force you to buy it. And even after all of the glitches are fixed, and the crashes resolved, that fundamental aspect of the law’s design will remain.