Small businesses and health care reform

This week, the Obama administration announced that health insurance exchange enrollments quadrupled in November after a troubled debut in October. Administration officials declared that the website glitches that plagued healthcare.gov were now a thing of the past. As I noted earlier this month in an interview with Gene Valicenti on 630-WPRO, however, the health insurance exchanges remain a work in progress. Insurers continue to report problems accessing subscriber data entered through healthcare.gov. Corrupted or missing data raises insurers’ costs and also delays the completion of the enrollment process. The Obama administration has yet to release demographic data on new enrollees. This is significant, because the long term “affordability” of the Affordable Care Act (ACA) depends not only on the number of newly insured Americans but also by the characteristics of these newly insured consumers. Two issues, in particular, warrant close observation in the coming months.

Before Thanksgiving, the Obama administration announced that it would postpone launch of the Small Business Health Options Program (SHOP) by one year for states with federally operated exchanges. Thus, in more than 30 states, small firms who expected to purchase coverage through the exchanges are now scrambling to renew their existing health insurance coverage or are shopping for other plans. Since these small businesses will not join the exchanges during the ACA’s inaugural year, their employees – many of whom are relatively young, healthy workers –  will not be available to offset the costs of older, sicker individuals purchasing coverage through the exchanges. As a result, per-enrollee costs for the first year of the ACA may be considerably higher than expected.

The second challenge flows from the first. Insurers are under no obligation to participate in the new health insurance exchanges – indeed, many of the nation’s largest carriers opted out for the first year. If costs per enrollee exceed projections, insurers are likely to raise rates or drop out of the marketplaces altogether. If insurers raise rates substantially, some consumers who purchased coverage this year may opt to not renew their coverage, or alternatively, may select cheaper plans with higher out of pocket costs. Stay tuned…the rollout of the ACA is never dull!

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The ObamaCare Trojan Horse

In recent weeks, President Barack Obama sought to soothe growing public concerns about the troubled healthcare.gov 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.

What the public knows

On the day the new health insurance exchanges made their debut in states across the USA, the public remains thoroughly confused about what the new health care law means. Teaching courses on health care reform, policy analysis, and health care in popular culture to savvy undergrads provides me with a small army of astute health care observers. Yesterday, six of my students shared the following video from Jimmy Kimmel with me:

The interviews presented in the video underscore the political problem facing the ACA. People’s views on health care reflect their partisan loyalties, ideology, and level of information. Most Americans still don’t understand the complexities of the law, how it will affect them, and what it means for the country. This is not simply a result of “misinformation” campaigns by opponents, although it’s clear that individuals’ perceptions of the law are shaped by their views of the President. Recent polls, however, suggest that “ObamaCare” can also have a positive impact on public perceptions, depending on whether respondents live in traditionally “red” or “blue” states. Support for the ACA/Obamacare, therefore, will remain mixed for the foreseeable future, and will vary widely from state to state. To change this state of affairs, supporters of reform must tell a new policy story that can bridge the gap between the insured and uninsured, and between businesses and employees. The rhetoric about health care reform continues to divide us, rather than bring us together. 

Will coverage under the Affordable Care Act be ‘affordable’ enough?

The hazy, hot and humid days of summer led me to take some time off from blogging to go camping, and even catch Taylor Swift in concert at Gillette Stadium. Now that the heat wave is past, and cooler days and nights have arrived, it’s time to catch up on recent discussions of health insurance premiums. In July, I had a chance to sit down with Chrissy Centazzo from the PC Public Affairs office to chat about the debut of Rhode Island’s health insurance exchange, HealthSource RI. In recent weeks, President Obama and many state officials trumpetedlower than expected premiums for health insurance offerings under the new health insurance exchanges in states such as California, Maryland, Oregon, Tennessee, and Virginia, among others. Defenders of the ACA argue that premiums will be more affordable for uninsured families, and small businesses and individuals who will purchase coverage through the exchanges. The long term success of the ACA in expanding coverage and controlling costs, however, depends on signing up healthy young subscribers.

Selling the plans, however, will be a challenge. While projected premiums are lower than many forecasts, coverage through the state exchanges is not cheap. As Louise Radnofsky noted, individual premiums for twenty-five year olds who don’t smoke ranged from $117 per month in Tennessee to $156 per month in Baltimore. Will cash-strapped consumers opt to purchase coverage at an annual cost of at least $1400, or will they continue to rely on safety net providers and hospital emergency rooms for care? Since the annual penalty for not purchasing coverage ($95) is less than the cost of one month of the most affordable health insurance on the market, how many healthy young adults will choose to pay substantially more to purchase coverage, particularly when the “Bronze” level plans impose significant cost sharing for newly insured subscribers? As the Fall enrollment season approaches, both supporters and opponents of ACA will weave stories to define the success or failure of the individual mandate. Stay tuned… the debate over ObamaCare has just begun…