Is Obamacare Really an Improvement on the Status Quo?

Megan McArdle is a Bloomberg View columnist. She wrote for the Daily Beast, Newsweek, the Atlantic and the Economist and founded the blog Asymmetrical Information. She is the author of "“The Up Side of Down: Why Failing Well Is the Key to Success.”
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Bob Laszewski , an insurance industry expert who has become the go-to guy for the news media on the rollout of the Patient Protection and Affordable Care Act (because the insurance industry is extremely reluctant to talk), tells the Weekly Standard that he thinks come Jan. 1, more people will have lost private insurance than gained it:

"Insurers privately tell Bob Laszewski that they think more people will have lost insurance by January 1 than the number who have signed up for Obamacare by January 1.

"'I was out making some client calls this week with a number of different carriers and they know exactly how many policies they canceled and how many who reupped. And they know how many people have come in through the exchange,' says Laszewski. 'And I didn't find one of them who thought they were going to be net ahead on January 1. They all think they're going to net behind on January 1. That's where it's trending so far.'

"So far, at least 4.8 million Americans have received insurance cancellations notices, but Laszewski predicts that the total Obamacare enrollment will be less than half that number on January 1.

"'My guess is that we'll have somewhere around a million and a half people signed up for Obamacare on January 1 in the states and in healthcare.gov,' he says. The big question then, he adds, is 'why have we gone through this whole dislocation of the American health insurance system if only a million and a half to two million buy health insurance?'"

Maybe we'll make up some of the gap with Medicaid. But at the current pace of enrollment, it would be a big hurdle to make up all the losses. Which means that we may well start the year with fewer people insured than we had in January 2013. There's reason to think that that may be what the administration is seeing in the latest enrollment numbers.

One of the major defenses being offered for Obamacare -- botched rollout and all -- is that the status quo was so awful. Obamacare may have its issues, but at least it's not the bad old days.

The problem with reformers is rarely that they're wrong about the status quo; there are a lot of awful things in the world that could use fixing, and the reformers have usually correctly identified at least a few of them. The problem with radical reformers is that they tend to forget that things can get worse, as well as better.

If I'd sketched out the current scenario last summer -- computer systems don't work for months, millions lose insurance, and by the beginning of December, only 1.2 million people have picked up coverage from the exchanges and Medicare combined -- the law's supporters would have rolled their eyes and shaken their heads at the wishful thinking of the law's critics. And now they generally assume that it will of course get better -- that by March 31, if not sooner, we will see a measurable and substantial reduction in the number of uninsured.

But while that's certainly very possible, it doesn't exactly seem inevitable. To be sure, I myself find it hard to believe that the number of uninsured people will actually rise, even temporarily, as a result of the law. On the other hand, the administration has been pretty quick to leak whenever they had good enrollment numbers, and we haven't heard a peep since the beginning of the month. So however incredible, it's at least a real possibility that we'll see a net decline in coverage on Jan. 1 -- or even on April 1.

That has implications beyond just the people who would be uninsured next year. A lot of these insurance pools are already pretty small. If enrollment is much lower than expected, many markets may not have enough customers to make a viable pool. Even if the insurance pool isn't older and sicker than expected, a pool that is too small can be wiped out by a couple of unlucky and expensive illnesses.

If the December numbers show a net decrease in enrollment, the administration will probably offer reasons to hope that we'll see a late influx of young, healthy customers by March. Or maybe they can argue that this is a down payment on the future, and things will really get going in 2015. If they can keep premiums low heading into Obamacare's second year, then it's probably reasonable to think that more people will sign up.

But you can't just keep making down payments on the future forever; at some point, you have to close the sale. If the administration can't deliver a substantial net enrollment expansion by winter's end, Democrats are going to have a very hard sell with voters come next fall. And that, in turn, is going to make it harder for Democrats to actually build Obamacare into the coverage-expanding, cost-lowering, voter-pleasing program they thought they passed in 2013.

This column does not necessarily reflect the opinion of Bloomberg View's editorial board or Bloomberg LP, its owners and investors.

To contact the author on this story:
Megan McArdle at mmcardle3@bloomberg.net