Obamacare

The End of Obamacare As We Never Knew It

The president's "fix" might be the beginning of the end for his signature program

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President Barack Obama finally decided last week to honor his promise of letting people who like their "junk" insurance policies, keep them. "Period." In a rambling, hour-long press conference he said insurers would now be allowed to restore the plans that he himself had forced them to cancel because they did not comply with the minimum benefits of the Affordable Care Act.

Whether this will save Democrats from a shellacking next November remains to be seen. But this might well be the beginning of the end of Obamacare as we never knew it.

The president's announcement was calculated to head off mass defections by panicked Democrats to the Republican "Keep Your Health Plan Act" proposed by Rep. Fred Upton. Upton's bill passed the House anyway with 39 Democrats voting for it on Friday. Had the administration not acted, more than 100 House Democrats would have switched sides—never to return to the Obamacare fold.

Like Upton, the administration will allow insurers to reverse their cancellations for existing customers. Unlike Upton, however, the administration won't allow insurers to extend these "junk" policies to new customers. Also, the administration's plan will grandfather these policies for only one year whereas the Upton plan would allow Congress to reauthorize them every year.

The Upton plan would basically gut Obamacare because the program's viability depends on its ability to herd the 15 million or so Americans getting "junk" coverage from the individual market onto the Obamacare exchanges where they'd be forced to pay more for benefits they don't need. This would spread premiums across a bigger population and keep coverage affordable. (At least in theory.)

But Upton's bill would not only allow these people to keep their existing coverage—possibly into perpetuity, it would over time expand this population, depriving Obamacare of the sacrificial lambs it needs.

The smart money is that the Upton plan ain't going anywhere. But it doesn't have to. Its very existence might have forced the president to gut his signature initiative.

The administration's own data so far shows that, thanks to the ongoing debacle that is the Obamacare exchange, only 100,000 or so Americans have "enrolled" in the program so far, less than a tenth of what was originally projected. (Millions more have lost coverage due to cancelled policies than gained coverage through the exchanges. In Michigan alone over 200,000 people have faced cancellations while less than 1,500 have obtained it through the exchange.)

But the low volume is not the only problem. Most of the people motivated to scale the Obamacare obstacle course, it is feared, are sicker and older.

This will cause Obamacare's premiums to soar, unleashing the much-dreaded death spiral of adverse selection as more healthy folks drop out, leaving the sicker and more expensive patients in the program.

The only prayer the administration had of avoiding this eventuality was by fixing the exchange and getting more healthy people to sign up. But now even if the administration fixes the exchange—a big "if"—what incentive will these folks have to sign up if they can keep their existing plans? Both Obama and Upton only want insurance companies to have the option of restoring junk policies. But Louisiana's Democratic Senator Mary Landrieu is working on a bill that would require insurers to restore these policies.

Some liberals claim that a one-year allowance for "junk" coverage won't mean the end of the world. In fact, this will relieve the pressure on the exchange and give the administration more time to fix it before people are required to buy up-to-snuff plans next year.

But Ethics and Public Policy Center Fellow Yuval Levin points out that this fundamentally misunderstands the logistics of the insurance industry. Because insurance companies are required to submit their requests for premium increases to state insurance commissions a year in advance, their 2015 premium increases will be based on the risk pool that materializes by the spring of 2014. And because this pool is going to be expensive to insure, these requests will be high.

The commissions can reject the requested increases. But if they do so, these companies might bow out altogether, prompting the Obamacare humpty-dumpty to fall apart. If they approve the increases, they will unleash the death spiral—not to mention another sticker shock just before elections.

It is becoming harder to envision a scenario under which Obamacare can survive. The main issue is whether its death will be prolonged and painful as the administration tries this or that unworkable therapy—or quick and merciful as more members of his party start clamoring to pull the plug.

A version of this column originally appeared in the Washington Examiner

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  1. In the dead-tree version, the Chron is reporting that the CA insurance mucky-muck is not happy with Obo’s request. Seems he’s figured out that it’ll skew the sign-ups to the high-cost/low-pay end of the curve.
    Hmmm. Wonder why Obo didn’t have that epiphany. Could it be he was simply handing out one more slight-of-mouth?

  2. They’re damned if they do and damned if they don’t.

    The high premiums and the sticker shock will kill them in the elections next year, either way. Sacrificial lambs get to vote in next years election.

    Let people keep their health care plans – death spiral.
    Don’t let people keep their health care plans – lose the senate.

  3. They’ll opt for the death spiral and the slow, agonizing death. Does anyone doubt this?

  4. Obamacare is not going away. The only real nonpartisan objection to Obamacare is that it fails to deliver on the government’s universal promise of something for nothing. As soon as that is restored, presumably with massive subsidies, all will again be well with democrats and their fan club.

    And if it ultimately flops and we wind up with republicans controlling Congress, does anyone actually think the republicans aren’t subject to the exact same “something for nothing” demand from the voters? All the democrats have done is set a new record for stupidity, which for republicans is just a challenge to surpass them.

    Choosing between republicans or democrats is about the same as deciding which of your nuts to smash with a hammer. That would make a nice attention-grabbing motto for any independent candidate for public office.

    1. I tend to agree with Mr. Krueger. It appears that the “keep your plan” modification announced last week added some nice and tidy loopholes called “risk corridors” where the gubmint basically created a blank check to bailout the insurance companies if/when the obamacare scam goes belly up and they lose their ass. To me this says they will keep getting taxpayer money to keep their mouths shut while the whole thing crashes.

      Then we get sold the single payer health system on lies and false choices, some villification of market-based solutions will ensue, libertarians will be ridiculed, the republicans will do something stupid (tbd) and we get universal health care at the point of gun. Yes, the public is too dumb to know better.

    2. Dave, I sometimes struggle to articulate good analogies which illustrate my equal disgust for both Democrats and Republicans, but you have done my work for me with the nutcracker.

      Also, you’ve indicated that the larger problem besides the parties is their voters/fan clubs and the role they expect government to play in their lives. I stole it, it’s on FB now (with credit, of course).

    3. There’s no doubt the Dems will propose subsidies for individuals and a widening of those risk corridors, thus keeping two key support groups: the gimme citizens and the corporate cronies. Yowch.

  5. My BIG beef with what’s going on: the unilateral changes to the law Obama is making. Nobody seems to care that Obama is changing a duly-passed law by fiat without a hint of complaining of this Constitutional end-around from Congress.

    Instead we get debates about the political implications of what he’s doing, ignoring the much larger constitutional problems.

    This almost seems designed to lead to a more and more powerful executive: pass a flawed law on partisan lines that expands government power; make sure Congress is too divided to do anything — fix it, repeal it, whatever — about the law once the flaws become apparent; wait for President to “fix” it by fiat; cheer. Undoubtedly, this strategy will be used by future presidents. THAT is what we should be afraid of.

    1. So, you’re OK with the fact that it’s rather literally a Ponzi Scheme? 🙂

      Between patchy state-to-state implementation, one-size-fits all requirements, and the deliberate age-discrimination this sets up, I think you’re sorely mistaken if you think this won’t bounce off of SCOTUS once or twice more (not to say that it will fix the problem, but it could).

      1. Did I say that? No.

        I just think the MUCH larger issues are the Constitutional ones, not the policy ones. These “fixes” to Obamacare — there have been multiple so far — are not allowed in the law. How is that okay? Why is nobody complaining about this? Instead, it’s all about the policy/political implications of what he’s doing.

        Also, btw, I’m sick of everything being compared to a Ponzi scheme. Everything is a Ponzi scheme if you stretch time out to infinity. Screaming “Ponzi scheme” at every financial scheme you don’t like is downright silly, especially considering the concept wasn’t even around a century ago (before then, it was just called “doing business with somebody you shouldn’t have”).

  6. Stop doing things to save the ACA, Republicans, most people (like me of the time being) are being herded to medicaid anyways.

    Let middle class Americans pay, you know half of them voted for Obama. The other half will take the schadenfreude as consolation.

  7. Google is paying 75$/hour! Just work for few hours & spend more time with friends and family. On sunday I bought themselves a Alfa Romeo from having made $5637 this month. its the best-job Ive ever had.It sounds unbelievable but you wont forgive yourself if you don’t check it out http://www.Buzz95.com

    1. Whaaaat ?

      And give up my O’care subsidy ?

  8. This whole article is wrong! I feel like I have a crystal ball here…here’s what’s going to happen:

    1. People will be allowed to opt out.
    2. Prices will rise for Obama-approved plans.
    3. Subsidies will be enlarged and spread out, putting us more in debt.
    4. These subsidies will get high enough that people will start signing up.
    5. Once the subsidies get large enough, and everyone is in the system it will creep toward single payer in about 12 years when everyone forgets how horrible this is.

    ObamaCare isn’t going anywhere! As long as Obama has a printing press, and the American people are schooled by leftists who don’t understand Econ101, cost will not matter.

  9. Can’t wait for the first individual to find a policy that does not comply with the ACA but does with the “Executive Order” and then registers a lawsuit that they were sold an illegal product. Or maybe the insurance companies will refuse to pay benifits based on these illegal policies. Either way, it sure will be fun to watch.

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