Thursday, November 14, 2013

Obama gives "grandfather" status to existing health insurance plans for one year

Posted By on Thu, Nov 14, 2013 at 1:45 PM

President Barack Obama announced today that the administration is extending "grandfather" status for one year to any health insurance plans for which coverage was in effect on October 1 of 2013. Basically, this means that carriers can choose to continue to offer plans for an additional year to existing customers even if the plans are not compliant with the Affordable Care Act. That includes plans that have been cancelled over the last few weeks, the source of much political grief for the Obama administration. 

It's always been the case under Obamacare that customers could renew their policy with a carrier late in 2013 in order to keep it through the end of 2014. In some states, insurance regulators banned this practice, but Arkansas Insurance Department Commissioner Jay Bradford allowed early renewals in Arkansas, and carriers in the state have already been marketing the option. In Arkansas, in other words, carriers could already give customers the option to keep their plans through the end of 2014.

The Obama proposal goes a little bit further: carriers can give customers the option in 2014 (through Oct. 1, 2014) to renew a plan for one more year, meaning that they could keep a plan into 2015. Here is the letter from the Obama administration to insurance commissioners explaining the policy. It will ultimately be up to state commissioners whether and how to implement these rules. One question for Arkansas: can customers who "early renew" in December of this year then do so again in October of 2014? If so, everyone who currently has an individual plan in Arkansas would have a means to keep their plan well in to 2015. I've got a line in to Bradford asking for clarification on this point. 

Here's the thing. Just because carriers can offer a plan doesn't mean they will. The individual health insurance market has always been extremely volatile. People move in and out and rarely stay with a given plan for more than a year or two, and carriers discontinue plans all the time. Continuing to offer a plan for an additional year via the new grandfather policy may or may not make any business sense. Meanwhile, in terms of plans that have been cancelled, there are major logistical hurdles to un-cancelling at this stage in the game. In short, it's too early to say whether today's announcement will have much impact in practice. Depending on how state regulators and insurance companies react, it might not change much at all. That said, it's certainly a better proposal than Sen. Mary Landrieu's bill (which Sen. Mark Pryor has endorsed), which would permanently grandfather existing plans — creating a separate, exclusive pool of healthy people, leading to higher premiums on the Health Insurance Marketplace for everyone else — and mandate carriers to continue offering existing policies. The Obama plan, if carriers and state regulators choose to use it, would basically create additional time for people to transition and adjust to disruptions in the individual market. 

And let's be clear: Disruptions to the individual market, where about 5 percent of Americans currently get health insurance, were an inevitable part of Obamacare. Given that, Obama's "if you like your plan you can keep it" was dumb. It was especially dumb since even without the law, there was no way to guarantee that people could keep a particular plan in the individual market. But all this talk of "fixes" is even dumber. Currently the individual market is a place where exclusion and price discrimination often make it impossible for the people who need affordable health insurance the most to get it. And it's a place where people often find they aren't covered if they face serious health problems (most medical bankruptcies happen not to the uninsured but to the underinsured). Obamacare is an effort to reform that market. You can't make these reforms without changes for some people. Ezra Klein nailed this last week: 

There's been an outpouring of sympathy for the people in the individual market who will see their plans changed. As well there should be. Some of them will be better off, but some won't be.

But, worryingly, the impassioned defense of the beneficiaries of the status quo isn't leavened with sympathy for the people suffering now. The people who can't buy health insurance for any price, or can't get it at a price they can afford, or do get it only to find themselves bankrupted by medical expenses anyway have been left out of the sudden outpouring of concern.

If people have a better way to fix the individual market — one that has no losers — then it's time for them to propose it. But it's very strange to sympathize with the people who've benefited from the noxious practices of the individual market while dismissing the sick people who've been victimized by it.

That last point is worth repeating: the reason that currently healthy people can often get very cheap premiums in the individual market today is precisely because the individual market is so good at keeping out sick people (and doesn't always do much for the healthy when they do get sick). If our main goal is to protect the few already benefiting from the current system, it will be to the detriment of those who are hurt by it.

All of this circles back around to the website. Disruptions in the individual market would be happening whether or not the website was functioning, but the broken healthcare.gov has led to an asymmetry that has been a political disaster. We're hearing stories about cancelled plans but not about millions gaining coverage. Some of the people whose plans were cancelled will end up with a better deal in the Obamacare marketplace, but they don't know because the site isn't working. And while some people, particularly healthier and more affluent people, will end up paying more, a cancellation is a whole lot scarier when the other options aren't available to easily buy. It feels like losing coverage altogether.

It's boring to keep saying "if the website starts working" but that's the key to everything, as Obama himself acknowledged today. This grandfathering "fix" may help to buy time politically, but it's really a sideshow. 

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