A Tiny Bit on Implementing the ACA

November 18th, 2013 at 2:31 pm

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.




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9 comments in reply to "A Tiny Bit on Implementing the ACA"

  1. urban legend says:

    So were you lying when you said that, Jared? Of course not. It was a reasonable short-hand way of saying you could keep a policy if it was grandfathered, if it contained similar protections — not necessarily identical — to the basic requirements of the ACA (as many employer/group policies already do), AND if the insurance company continued to make it available. Of course, most people took it that way, recognizing that health insurance is a very complex subject. No, you can’t keep your policy with a $10,000 annual cap on coverage because you could not possibly “like it” if you understood what junk insurance it was. The expression you and the President used was never interpreted by reasonable people to mean that.

    It’s the Fox-Limbaugh-Drudge Evil Axis that keeps saying it was a lie, over and over and over and over, louder and louder and louder and louder. And so they won’t be accused of being too liberal, the mainstream media with no critical faculties report the Evil Axis accusations and the anecdotes they have solicited; and so they don’t sound unduly combative — heaven forbid being accused of being combative! — liberals admit it was “misleading.”

    When will liberals get rid of the reflex urge to apologize as soon as the Evil Axis scandal meme of the week gets some traction? (See, e.g, the President’s ridiculous apology for the IRS matter before all the information was in.) There was nothing particularly misleading about what you and the President said about ACA, and you have nothing to apologize for. Be combative! When all the information says you should apologize, then sure, apologize. But when the flap is still based solely on right-wing agitating, even when the media feeding frenzy has been activated, apologizing before all the information is in is weakness.

    • Chatham says:

      This. Telling people they could keep their plans was in response to the howling on the right that the ACA was going to kick everyone off their plans. It’s like someone spreading rumors in the office that the new owner is going to fire everyone, causing everyone to freak out, and the new owner comes in and says, “no, this isn’t true, I’m going to let you guys keep your jobs.” Later an employee is caught stealing and they’re fired, and the guy that started the rumor starts yelling, “See! They lied when they said that we could keep our jobs!” Then the boss apologizes and lets the thief stay on another year.

      It’s really hard for me to understand why the Democrats and the Media seem to be so affected by these Kindergarten tactics.

  2. Jill SH says:

    Listening carefully and reading between the lines of many of the personal stories of insurance cancelation in the media (including one or two postings here on your blog), I am profoundly alarmed at how little understanding there is of just how complicated our private health insurance system is, and how easy it may seem to those who have been able to buy in the individual market because: a) they have the means to pay the premiums, probably a household income in the six-figure area; b) they aren’t phased by a 5k or 10k deductible because they can afford an HSA to cover it; c) they are still under age 50 or even age 45, so they haven’t hit the steep rise in underwriting as one gets older; d) they are blessed with good health. Which is also why they’ve never experienced the limitations of their policies.

    I want to kind of yell at them and say “Try getting that family coverage on 40k a year!”

    In the meantime, O-care is a slog. But how soon will the Republican health care site be up?

  3. The Raven says:

    I think a lot of the people who want to keep their policies are older people who can’t afford anything better. You might want to consider that in your computations.

    • Jill SH says:

      “Can’t afford anything better.” But that’s just what the ACA offers. Good comprehensive coverage at an affordable rate, because you’ll get subsidies if you can’t afford it!

      The whole marketing of health insurance in the country has made the product so dear (in both senses of the word) that direct consumers — those in the individual market — have been duped for a long time into accepting substandard policies at ever-rising rates, thrilled/relieved if they can get insurance at all.

      If I recall correctly, here in my state at one point, the medical loss ration in the individual market was 50% (only one carrier). So they were making a healthy (pun intended) profit off the healthy people they chose to insure. (No guaranteed issue in the individual market.)

  4. Kevin Rica says:

    The outcome in the pictorial illustration is binary. But in neither possible outcome will there be medical bills.

  5. jeff says:

    Wait until next year, when employers start dumping their health coverage because of the new mandates. Millions are going to become tens of millions.

    This thing ain’t over, it’s just starting.

    Yet, the expansion of Medicaid is going rather smoothly, indicating how much better a comprehensive government run national system would be.

    Unfortunately, the consensus ‘take’ from all this will be that the government can’t do anything right and we need to lower taxes on the rich again.

  6. save_the_rustbelt says:

    Nice picture.

    The entire purpose of ACA was to be disruptive, although Obama and his acolytes didn’t know how disruptive, and weren’t very honest even when they knew.

    To quote a prof of mine

    “…if you throw a bowling ball through a plate glass window you do not get a clean 10″ hole, you get shards flying every which way…”

    The worst is yet to come.

  7. Tom in MN says:

    Our Gov rejected this “fix” at the urging of insurers in our state:


    As for the “you can keep your plan statement,” I disagree with the complaints that this was untrue — misleading to the clueless perhaps. The actor here is “you.” Nothing in the law forces “you” to give up your plan. Anyone that understands insurance knows that there is nothing stopping insurers from dropping their plans (even going out of business) or changing them so they are no longer legal (if they did not change them they would still be grandfathered). This should have been understood by anyone that thought about it for a second or two. But because the ACA gets rid of denial due to preexisting conditions, getting new insurance for these people is just a hassle and not impossible. And they get stuck with new insurance that won’t bankrupt them if they get very sick. I got forced to change my insurance by my employer (not ACA related) and it forced my kids to change their doctor. This stuff happens no matter what insurance you have.