As I can’t bear watching every twist and turn of the ugly ACA rollout, I’ve not commented much on it up here. But based on some recent developments, a few observations:
–Let’s ponder this kludge put forth by the President to let you keep your non-group plan if you so desire. It’s just not that simple, and understanding why not is important for understanding why this part of the ACA is built the way it is.
First, it’s not up to you, the consumer. Both insurance companies and state insurance commissioners will have a say in whether you can keep a plan that’s inconsistent with the consumer protections of the ACA. Private insurers regularly change and cancel non-group plans, and the President’s edict can’t stop them if that’s what they want to do.
State insurance commissioners, like this very articulate and interesting guy from Washington state I heard on the radio this AM, may decide that allowing these cancelled or inadequate plans (relative to ACA requirements) back into the mix is untenable from the perspective of risk pooling.
–What do I mean by that last point on risk pooling? Most insurers set their rate structures based on the risk pooling that is at the heart of the ACA and of every other advanced economies’ health care system. And yes, it involves some subsidizing of the sick by the well, again, a characteristic of any insurance program, though most in the individual market will be eligible for a government subsidy to offset the higher costs of more comprehensive coverage.
But if states decide to allow sub-standard plans to coexist with ACA-blessed plans, they’re trying something that’s actually quite tricky in actuarial terms: the coexistence of a high-risk pool alongside the ACA’s more balanced risk pools.
The former is pictured below, where you see a “young invincible” swimming in a risk pool that’s clearly more dangerous—i.e., provides less coverage–than he realizes. Of course, this undermines the actuarial logic of the ACA.
As the President has teed it up, this keep-your-old-plan scheme lasts for just a year, so perhaps the actuarial illogic of the thing doesn’t have time to play out in ways that would lead to unsustainable costs within the exchanges. But I wouldn’t be surprised if other state insurance commissioners said “no thanks” to this idea.
To be very clear, none of this excuses the misleading “you-can-keep-what-you-have” sales pitch (full disclosure—I made similar claims at the time). But simply saying, “Ok—never mind. You can keep it,” isn’t as easy as it sounds.
AN INADEQUATE RISK POOL