Keep Your Health Plan Act,” which House Republicans plan to vote on this week, is supposed to make good on President Obama’s promise that “if you like your health plan, you can keep it.”
Instead, it would just make Obamacare implementation even messier than it already is.
The Affordable Care Act imposes a wide variety of new regulations on health insurance sold in the individual market. But it “grandfathered” in all plans that existed before March 23, 2010, meaning insurers could continue to offer them even if they didn’t meet many of the requirements set by the ACA.
Plans lose grandfathered status if they change significant terms, like co-payments or deductibles. Because health plan terms change often, millions of Americans are getting cancellation notices because their existing plans are not grandfathered.
It was always obvious to policy wonks that this was going to happen, which means that Obama’s promise was what is commonly called a “lie.” Obama likely assumed that when Obamacare arrived, most people losing coverage would log into exchange websites and find plans that they liked even better.
That isn’t happening, in part because the federal exchange website is working so poorly, and in part because a few million people (mostly, young healthy people with moderate or high incomes) will get unambiguously worse health insurance deals than they had before the ACA.
So, people are pissed. But the House’s “answer” to this problem won’t do any good.
The Keep Your Health Plan Act would grandfather all plans as of January 1st, 2013, not March 23,2010, greatly increasing the number of existing plans that insurers could continue to offer on an unchanged basis. But that doesn’t necessarily mean that drastically more Americans would be able to keep their health insurance.
First, insurers aren’t ready for this change. Bob Laszewski, the president of Health Policy and Strategy Associates and one of the most vocal insurance consultants, outlined this on his blog:
Cancellation letters have been sent. Their computer systems took months to program in order to be able to send the letters out and set up the terminations on their systems. Even post-Obamacare, the states regulate the insurance market. The old products are no longer filed for sale and rates are not approved. I suppose it might be possible to get insurance commissioners to waive their requirements but even if they did how could the insurance industry reprogram systems in less than a month that took months to program in the first place, contact the millions impacted, explain their new options (they could still try to get one of the new policies with a subsidy), and get their approval?
The Obama administration told the carriers to be ready on October 1 and they are ready. You just can’t waive a magic wand and put Humpty Dumpty back together again.
If the House passed this bill, insurers would not all of a sudden be able to offer the old plans and undo all of the changes they have made in preparation for Obamacare the past three years. It’s not possible.
Second, government cannot force insurers to continue offering existing plans, it can only allow them to do so. Many would still choose to discontinue existing plans, for example because those plans are no longer profitable in the context of the ACA or, as is the case with United Healthcare in California, because they are exiting a state’s individual market altogether.
Third, even if insurers were able to keep the vast majority of plans in place, the effects on the overall insurance market would be very problematic. Cheap, bare bone plans are popular with young, healthy Americans who don’t expect to use much health insurance. Even without the subsidies, many of these plans would look financially advantageous, and many existing insureds in these plans would keep them instead of entering the ACA’s risk pools.
This would increase the risk of an insurance “death spiral.” The House bill still keeps the guaranteed issue and community rating provisions of the law: That is, insurers must offer health insurance to everyone regardless of health status and are tightly restricted in their ability to vary premiums. That deal is going to be very appealing to people with high health costs, and it’s important that young and healthy people also buy insurance through the ACA exchanges in order to cross-subsidise those eager, sick buyers.
Obamacare includes a carrot (subsidies) and a stick (individual mandate) to convince young people to sign up for health insurance to offset the increased costs of covering old, unhealthy people. The House act undermines the value of the carrot by allowing young people cheaper options outside of the exchange. This would skew risk pools inside the exchanges to be older and unhealthier, leading to higher premiums over time.
As Adrianna McIntyre has written, the Affordable Care Act includes a number of provisions that will offset these excess costs. These provisions continue until 2016, but insurers will undoubtedly want to correct their premiums to align with the market next year.
Finally, the House legislation undermines the consumer protections built into the law. Obamacare includes stringent requirements for what constitutes comprehensive coverage so that insurers can no longer offer weak plans that do not protect beneficiaries from financial ruin. This was a feature of the law. Obama knew this would require insurers to cancel many of their plans, but he lied to the public and went ahead with it anyways for the greater good. The House bill allows insurers to continue offering those plans that Obama explicitly set out to eliminate.
The Keep Your Health Care Plan Act will never become law thanks to the Democratic majority in the Senate and Obama in the White House. But if it did have any potential of passing, you would quickly see an outpouring of opposition from insurers who wouldn’t be ready for such a change and would fear the higher costs of it. In fact, this bill is much more dangerous than repealing Obamacare altogether. Repeal would force insurers to go back to the status quo, but it would not skew the risk pools like this legislation would.
Once again, House Republicans are not offering a fix to Obamacare, but instead are proposing a bill for political purposes that would be a disaster if implemented. Lather, rinse, repeat.
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