On Monday morning, President Barack Obama will address problems with Healthcare.gov in a Rose Garden statement.
The website, where residents of 36 states are supposed to be able to buy the health plans offered under the Affordable Care Act, has both frontend and backend problems. Anecdotal evidence suggests few consumers are successfully using it to buy health plans.
The White House has been trying to signal that it is working hard to fix the website problems while at the same time downplaying their significance. A White House official told Business Insider in an email:
He will remind the public that while these technical problems are unacceptable, the health care law is about much more than just a website — it’s about finally offering millions of Americans the health care security they deserve and giving new benefits and rights to those who have coverage today. The product — quality, affordable insurance — is good, and if anything, the interest and demand at the launch of HealthCare.gov proves just how urgently Americans want and need access to these new health care options.
This is the wrong tone to be striking. The problems with Healthcare.gov are a big, substantive problem for the Affordable Care Act and the president needs to explain to Americans when and how they will be fixed so his law can work as intended.
The distinction between the website and the “product” is illusory. Here are three key product problems that will arise if the Obama Administration cannot get the website working in short order.
1. People with existing individual-market insurance will have trouble maintaining coverage. About 14 million Americans currently get health insurance through private markets in individual health insurance, and many are getting notices that their existing health insurance policies are canceled effective December 31.
If Healthcare.gov were working well, this would be more or less fine: These people should be able to buy insurance through Obamacare’s exchanges. Some will have to pay more, especially if they are young and healthy; others, such as those with low incomes or pre-existing conditions, will pay less.
But without access to the exchanges, these people are likely to end up with coverage gaps or accepting unappealing offers from their prior insurers. A friend of mine emailed me last week because Blue Cross is cancelling his individual plan and offering him a new one that costs $US70 more per month and has higher out-of-pocket costs.
Taking that private offer would deny him the opportunity to shop for cheaper plans in the exchange, and he also wouldn’t be able to get a government subsidy toward his premium even if he qualifies for one. He lives in California, one of 14 states not using Healthcare.gov, so he will be able to shop on Covered California for a better deal. But if he lived in another state, he’d be in bad shape if Healthcare.gov isn’t in working order by, say, December 1.
2. The individual mandate will become problematic. The individual mandate is essential to the functioning of insurance markets under the Affordable Care Act, which is why the Obama Administration has sharply resisted Republican efforts to delay it. But you can’t hold people accountable for not buying a product that they aren’t able to buy.
The Obama Administration has a few months to get ahead of this problem. The individual mandate becomes effective on January 1, 2014, but it includes exemptions for “short coverage gaps” of less than months. So long as the exchange website is up and running and most people are easily able to buy plans by Feb. 15, they won’t get hit with penalties.
But if it’s still not working by then, Obama will have to have a conversation with Congress about delaying the individual mandate.
3. There could be an insurance death spiral. If buying insurance remains very difficult but possible, it’s likely that the small number of people who do buy will be disproportionately sick, which could lead to sharp rises in premiums in 2015 and beyond, causing more relatively healthy people to drop coverage, causing premiums to rise further and leading to the dreaded “insurance death spiral.” Yuval Levin explains what health insurers are freaking out about:
One key worry is based on the fact that what they’re facing is not a situation where it is impossible to buy coverage but one where it is possible but very difficult to buy coverage. That’s much worse from their point of view, because it means that only highly motivated consumers are getting coverage. People who are highly motivated to get coverage in a community-rated insurance system are very likely to be in bad health. The healthy young man who sees an ad for his state exchange during a baseball game and loads up the site to get coverage — the dream consumer so essential to the design of the exchange system — will not keep trying 25 times over a week if the site is not working. The person with high health costs and no insurance will. The exchange system is designed to enable that sick person to get coverage, of course, but it can only do that if the healthy person does too. The insurers don’t yet have a clear overall sense of the risk profile of the people who are signing up, but the circumstantial evidence they have is very distressing to them. The danger of a rapid adverse selection spiral is much more serious than they believed possible this summer. They would love it if the administration could shut down the exchange system, at least the federal one, until the interface problems can be addressed. But they know this is impossible.
Again, this is a problem that becomes a really big deal only if Healthcare.gov continues to work poorly all the way into spring 2014; so long as the young and healthy people can sign up in the first three months of 2014, there will be time to catch up on enrollment even if the picture looks bad on January 1.
And there is one more reason to be hopeful this nightmare scenario won’t materialise: Health insurers are eager to add tens of millions of new customers and have every reason to work to prevent a death spiral. Even if website problems that drag into 2014 cause the participant pool to be disproportionately sick, and insurers take a bath for one year, they will be motivated to price in a way that draws healthy participants in for 2015, so long as the website is working well by fall 2014, when 2015 enrollment starts.
Still, it would be best to avoid the problem altogether.
I hope the President today makes clear what the White House sees as the timeline for insurance signups: When they expect either the website or alternative signup channels to be in good working order; and what rules (if any) will have to be delayed to accommodate delayed signups.
Yes, there appears to be intense consumer interest in the products made available through the Affordable Care Act. That’s great. Save the victory laps for after people are able to buy the products they’re interested in.
CLARIFICATION: An earlier version of this post said that consumers would need to purchase insurance by March. Consumers will need to buy insurance by Feb. 15 for their plans to be effective on March 1.
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