The ObamaCare Trojan Horse

In recent weeks, President Barack Obama sought to soothe growing public concerns about the troubled website, arguing that “The Afforable Care Act is not just a website. It’s much, much more.” How much more became evident in recent weeks, as millions of Americans with individual health insurance received notices that their policies would be dropped because they failed to comply with ObamaCare’s minimum essential coverage standards. Congressional Republicans repeated calls to repeal the ACA, while Democratic legislators scrambled for political cover. On November 15, the House of Representatives voted to approve the “Keep Your Health Plan Act of 2013,” which would allow private insurers to continue to sell existing policies through 2014. The bill’s bipartisan support –  39 Democrats joined 222 House Republicans – reflected the political firestorm unleashed by the surge of cancellations over the past month.  In early November, President Obama apologized to Americans losing their health insurance coverage, admitting that the implementation of the ACA had not fulfilled his oft-repeated promise to voters that “if you like your private health insurance plan, you can keep it.”

Lost in the media frenzy about broken promises, however, is the fact that the wave of cancellations are not an unintended “side effect” of a flawed implementation process, but rather an intentional policy choice by the Obama administration. Compared to the higher profile and widely discussed elements of the ACA such as the individual mandate, the employer mandate, and the rollout of the health insurance exchanges, ObamaCare’s minimum effective coverage requirements raised few eyebrows among policymakers and the public. These arcane rules, however, are vital to the design of the ACA.

The administrative regulations issued by the Department of Health and Human Services are a Trojan Horse left at the doorstep of private insurers selling policies in the individual insurance marketplace. During the Trojan War, the Greek army laying siege to Troy constructed a massive wooden horse and left it at the city gates. The residents of Troy accepted the “gift” and proudly displayed it as a victory trophy. Under cover of darkness, however, the real purpose of the Trojan Horse became evident as Greek warriors, safely hidden within the massive structure, exited the horse and opened the gates for the waiting army, which subsequently sacked the city.

In a similar vein, ObamaCare’s regulatory requirements largely remained under cover of a media blackout, as President Obama insisted that “no matter what you’ve heard…if you like your private health insurance plan, you can keep it.” After the Supreme Court’s ruling in June 2012 upheld the basic structure of the ACA, President Obama repeated this claim, declaring that “if you are one of the 250 million Americans who already have health insurance, you will keep your health insurance – this law will only make it more secure and more affordable.” Instead of making individuals’ coverage “more secure,” however, the administration’s rulemaking process ensured that most of the 15 million Americans who’d purchased less comprehensive (“substandard”) policies would need to upgrade their plans.  The real purpose of these requirements – the law’s hidden Trojan Horse – was to eliminate “substandard” private plans and replace them with new, more comprehensive coverage.

Recent news reports indicated that as early as 2010 administration officials recognized that most Americans who’d purchased cheaper plans in the individual insurance market would need to change policies, as these plans would not meet the minimum coverage requirements established by the ACA. In a nationally televised news conference on November 14, President Obama encouraged those who’d lost coverage to shop for “better insurance.” Although he admitted that the cancellation of millions of private policies was “upsetting,” the president defended the ACA’s more stringent coverage requirements as the price of progress. “It is important to understand,” he declared, “that the old individual market was not working well. And it’s important that we don’t pretend that somehow it’s a place worth going back to.”

The administration’s apologies about the unintended consequences of the ACA simply don’t hold up to close scrutiny. The disruption of individual insurance markets was neither accidental nor unanticipated. Practically speaking, the viability of the exchanges depends, in large part, on enrolling millions of healthy young subscribers that previously purchased less comprehensive, low-cost private coverage. The individual mandate provided policymakers with leverage, but the administrative rules issued by the Department of Health and Human Services – a regulatory Trojan Horse – ensured that millions of Americans would need to upgrade their coverage by participating in the new health insurance exchanges.