President Obama’s plan to reverse himself and let millions of people keep their health policies—the ones that insurance companies cancelled because don’t meet the Affordable Care Act’s standards—is something like an attempt to unscramble an omelet. Among the problems:
State insurance commissioners are not enthusiastic. They’re the people who are actually in charge of approving the plans and rates that private insurers offer in each state. The regulators association threw tepid water on the plan in a statement Thursday, saying the decision “threatens to undermine the new market, and may lead to higher premiums and market disruptions in 2014 and beyond.” These officials can nix the idea at the state level, as Washington state’s regulator already has, according to the New York Times.
The feeling isn’t unanimous: California’s insurance commissioner, who already pushed some health plans to extend policies because they didn’t give customers the notice required by law, favors extending policies. But other state laws make doing so messy. In Florida, too, the commissioner supports the plan.
Insurers are also wary. The industry had a cool response to the reversal. Even if insurers want to extend the old policies, and their regulators agree, it’s not clear that there’s enough time. Will doctors and hospitals accept the resurrected plans? Rates and plans are normally filed for approval months ahead of time. “The complexity of trying to uncancel millions of canceled individual policies with only six weeks left in the year is staggering,” Citigroup analyst Carl McDonald wrote, Bloomberg News reports.
Extending old plans changes the risk pool next year. The people in the individual market whose plans were cancelled have already passed medical underwriting—the insurance industry’s practice, banned from next year on, of denying coverage to people for being sick or having other preexisting conditions. That means they’re generally a healthier bunch than those entering the exchanges next year. The idea that some of these folks would have to pay more for more robust plans was baked into the law—their premiums will help subsidize coverage for sicker people whom insurers can no longer turn away. That’s why regulators, actuaries, and insurers are warning that the change could destabilize the market next year and drive up premiums for everyone else.
Even if it works, the fix is not a fix—it’s a delay. Obama didn’t say he’d let people keep their old, noncompliant health plans indefinitely. Year-long policies that start through Oct. 1, 2014, will be considered OK, and the administration is “assessing whether to extend it beyond the specified time frame,” according to the administration’s letter (pdf) to insurance commissioners. But whenever the administration does start enforcing that piece of the law, people are going to get another round of cancellation letters from their insurance company. If they don’t have comparable choices on the exchanges, they’ll get angry all over again.