Obamacare's Predictable Train Wreck

by John M. Curtis
(310) 204-8700

Copyright October 29, 2013
All Rights Reserved.                                      

           Proving that the road to hell is paved with good intentions, the practical rollout of the Patient Protection and Affordable Care Act has created an upheaval in the private insurance market.  Since the so-called health exchanges opened for business Oct. 1, more and more insured individuals are getting cancellation notices.  President Barack Obama promised on numerous occasions that individuals with private insurance would be allowed to keep their insurance.  While over 14 million private consumers have individual policies, some 50%-75% will lose their coverage because insurance companies won’t meet minimum standards specified under the ACA.  Since Obama signed the ACA into law March 21, 2010, the White House knew that the normal attrition from policy cancellations could jump yearly from 40%-60% to as high as 80%, forcing consumers to pay more for policies.

             Anticipating these changes, the only way out was for the government to subsidize private policies to accommodate the more costly benefits required under ACA.  Since there was no provision to reimburse insurance companies for added costs, the industry has taken the defensive position of canceling existing individual polices.  Private insurers were warned that changing deductibles, co-payments or any other type of coverage would prevent “grandfathering,” a term referring to continuing coverage in tact.  Opponents to Obamacare blame the president for willfully deceiving individual policyholders now subject to cancellations or exorbitant rate hikes.  “If you like your health plan, you will be able to keep your health play,” Obama said in 2012, knowing that some 80% of policies would be cancelled.  ACA rules and minimum standards prevented insurers from offering policies without risking financial losses.

             Given the minimum standards of ACA policies, including such things as low deductibles, co-payments, mental health coverage, prescription drugs, etc., private insurers could not figure out a way to preserve profit.  “Nothing in the Affordable Care Act forces people out of their health plans:  The law allows plans that covered people at the time the law was enacted to continue to offer that same coverage to the same enrollees—nothing has changed and that coverage can continue into 2014,” said White House spokeswoman Jessica Santillo.  Insurance companies, knowing what they must eventually provide in coverage, have started canceling policies because of what’s required in 2014.  Most consumers with private individual policies—especially those that don’t utilize the benefits—don’t know how inadequate the coverage forcing high out-of-pocket expenses before using benefits.

             Obama’s opponents have exploited the idea that the president knew all along that most privately insured individuals would be forced out their policies.  “What the president said and what everybody said all along is that there are going to be changes brought about by the Affordable Care Act to create minimum standards of coverage, minimum services that every insurance plan has to provide,” said White House Press Secretary Jay Carney.  Part of the confusion today stems from the fact that most consumers didn’t know they had lousy coverage.  For people that rarely used their insurance, they’re only concerned about low monthly premiums.  To prevent the insurance industry from canceling policies, the government would have had to write legislation stopping insurers from arbitrarily canceling policies. Now that it’s almost 2014, the insurance industry panicked.

             For years, the insurance industry issued insurance to individuals who would most likely never use the benefits.  Insurers don’t want to take the risk of individuals using their benefits.  When the insurance industry speaks of preventive care or wellness programs, they’re hoping to keep individuals from using their benefits.  Only sick people use their benefits, costing insurance companies precious profit margins.  Ending the age-old restriction on “preexisting condition,” the ACA forces insurers to insure everyone, with out without prior medical conditions.  Charging higher premiums or not issuing policies at all was commonplace with individuals with preexisting medical conditions.  Only group insurance plans allowed anyone to obtain insurance without medical qualifications.  Canceling policies or increasing premiums is a knee-jerk reaction to rule changes under the ACA.

             Without Congress legislating restrictions against insurance companies canceling polices or increasing premiums, insurers will continue to price-gouge under the false premise that they face lower profit margins.  For years, health insurers have made hefty profits on group plans that were forced to take anyone with preexisting medical conditions.  Now that ACA finally requires insurers to provide a modicum of coverage and take all individuals the industry panicked canceling plans.  Instead of blaming Obama, the House and Senate need to either fix the problem or decide that Obamacare isn’t feasible in its present form.  White House officials must assure that the millions of families affected by the current upheaval don’t have gaps in coverage.  Working out some kind of government subsidy to insurers offering Obamacare policies may be the only way to go to stop the crisis.

John M. Curtis writes politically neutral commentary analyzing spin in national and global news.  He's editor of OnlineColumnist.com.and author of Dodging the Bullet and Operation Charisma.