With storm clouds gathering over the White House last week as insurers cancelled or prepared to cancel millions of individual health insurance policies because the policies fail to conform to the federal health reform law, the White House blinked and offered that, if state authorities agree, insurers may choose to continue to sell those policies for another year, perhaps longer.
To many people affected by the cancellations, the coverage terminations flew in the face of the President’s repeated assurances over the past several years that the health reform law would allow people with insurance to keep their current coverage if they like it.
In fairness to the President, he might have been speaking in broad strokes; he might simply have meant, for example, that the health reform law doesn’t force individuals off private coverage and onto a government program. But perhaps millions of registered voters took his remarks to mean something else, and last week their anger reached critical mass within a White House already reeling from a horribly bungled rollout of the federally-run public health insurance exchange, or “marketplace.”
In this blog posting we offer first an explanation of what last week’s announcement means, that is, who it affects, and who it does not. Then we offer a few political observations.
Last Week’s Announcement: What Does it Mean?
Beginning in 2014, individual health insurance policies must cover a suite of “essential health benefits” (even if the coverage is meaningless to the policyholder, such as maternity coverage supplied to a man or to a woman older than childbearing age). The policies are also rated on a communitywide rather than an individual basis, are subject to guarantee-issue and guarantee-renewability requirements, and must cover an insured’s preexisting conditions.
Many existing policies don’t comply with such requirements, so the insurers offering them began to cancel the policies, offering instead more robust and thus costlier coverage that complies with the reform law.
In many cases, the individual would be able to obtain the new coverage in a public health insurance marketplace, often with federal subsidies that would offset or even exceed the cost increase. But in some cases the insured would not qualify for subsidies, and thus would have to pay more to replace his or her existing coverage. Hence the political problem.
The White House’s response last week was to say that federal authorities would not enforce, in the individual and small group markets, many of the reform law’s mandates for 2014, allowing the insurer to continue to sell the nonconforming policies for another year. A day later the House of Representatives passed a more generous extension, but given the President’s action, the House bill likely won’t come up for a vote in the Senate.
The White House announcement does not affect self-insured or large group insured coverage. Nor does the announcement defer all the health reform mandates with which insurers were preparing to comply in 2014.
For example, the announcement does not defer the reform law’s prohibition on annual dollar limits on essential health benefits, and thus does not save traditional limited medical or “mini-med” policies. In addition, by allowing millions of Americans to continue nonconforming coverage outside of the public health insurance marketplaces, the White House action might contribute to destabilization of those marketplaces, which are sure to attract a great many poor health risks over the coming months and drive the need for millions of relatively young, healthy enrollees to counterbalance the poorer risks.
The Fascinating Politics of the Short-Term Non-Enforcement Policy
The White House’s action last week underscores at least four political realities.
First, it would behoove our politicians to have a better grasp of the implications of the laws they pass before going on national television and misrepresenting to the electorate − if even innocently − the changes the law will bring.
Second, politics is often driven less by reason than by emotion. The President’s announcement last week reflects how quickly voter anger can change a political course. Remember that many − perhaps most − people losing their individual coverage are eligible to replace their policies in the new public health insurance marketplaces, in many cases with hefty federal subsidies.
But we suppose it became more and more difficult for the President to press that legitimate and very rational argument in the face of the ongoing difficulties the federally-run marketplace is having in allowing people to shop for and enroll in new coverage. The President simply couldn’t say, for example, “Don’t worry…you can replace your coverage with marketplace-facilitated coverage…as soon as we fix the problems with our marketplace.”
Third, that second political reality − that political action is often driven by short-term emotion − is increasingly puzzling given the increasingly short-term memory of voters. Who now remembers that just a month ago pundits were opining that Republicans would take a beating in 2014 because of the government shutdown? How long will voters really stay angry at the ObamaCare rollout, with a full year until Congressional midterm elections?
Could not the President simply have decided to ride out the political storm, believing that the federal marketplace’s problems would be solved in a matter of weeks, that many policyholders angry today would find peace (and better, subsidized coverage) in that marketplace, and that as voters return to the polling booths a year from now, all (or nearly all) would be forgotten, forgiven or replaced by some new issue?
Apparently, the White House thought it and its political allies had too much to risk.
Fourth, like many politically-motivated actions, last week’s announcement doesn’t really solve the actual problem, but simply defuses the political one. The White House announcement doesn’t unilaterally stop the policy cancellations. Rather, the announcement simply shifts — rather deftly — the onus for action to the states and insurers.
For example, the states must now decide whether, in fact, to allow insurers to sell nonconforming policies. And at day’s end, the insurer will make the final call: Does it even want to continue to offer the nonconforming coverage or reinstate coverage it has already terminated?
For its part, the White House may now say, “Look, we did all we could to stop the cancellations…if you still lost your coverage, blame your state or your insurer.”
Will Democrats pay a price for the cancellations, or for the discombobulated rollout of the federal health insurance marketplace? We think probably not. Time heals all wounds, and there is a lot of time between now and next November.