More On the Health Insurance Cancellations

October 30th, 2013 at 8:48 am

Well, if you want to steep yourself in the latest argument about health care reform, I hope you’ve got some free time.  The papers are brimming with stories about the President’s inaccurate statement when selling the bill that “if you like your insurance, you can keep it under this plan.”  I suspect I made similar comments at the time.

The accurate statement should have been: “If you’re one of the 95% of insured Americans with health coverage through your job or the government, then your plan won’t change.  If you’re purchasing a plan in the individual market, and that plan remains unchanged, you’ll also be able to keep it.  But if you’re non-group plan changes for the worse, it won’t be offered once the new law kicks in.”

It’s awfully hard to separate substance from politics right now, but this is just a simple adverse selection problem.  You can’t have a sustainable national health care system wherein people are allowed to impose their health costs on others, just like you can’t have an auto insurance system with uninsured drivers.  The key to understanding this part of the law—and again, we’re abstracting from the politics for a moment—is that the word “insurance” implies a standard level of coverage that avoids the type of cost shifting that occurs when an un- or under-insured person gets sick.

The individual market is fraught with such plans, and many are inconsistent with the ACA.  So they can’t be offered under it.

Getting back to the politics, the biggest problem for the new law right now is not just that the President misspoke.  It’s the collision of this feature of the law with the bugs in the sign-up system (and it is a feature—the people getting cancellation notices will generally end of with better coverage, and because of the subsidies, many will pay less for those plans than they would have absent the ACA).   It’s rotten to learn that your insurance policy, however insufficient, is no longer available at the same time that you can’t access the new system.

I’m confident that there’s an effective, affordable shopping center for health coverage at the end of a road that is still filled with potholes or worse.  The people with inadequate coverage in the non-group market, many of whom are getting anxiety-producing cancellation notices, need to be able to drive down that road very soon.

Print Friendly, PDF & Email

20 comments in reply to "More On the Health Insurance Cancellations"

  1. save_the_rustbelt says:

    9:10 am EDT

    The system is down at the moment.

    We are experiencing technical difficulties and hope to have them resolved soon. Please try again later.

    In a hurry? You might be able to apply faster at our Marketplace call center. Call 1-800-318-2596 to talk with one of our trained representatives about applying over the phone.

  2. George N. Wells says:

    The issue of: “keeping your insurance” is very misleading. Health Insurance, like most forms of insurance, is sold as an annual contract. I have also read and seen many of the reports of cancelled policies. I have also talked to more than a few complainers at the local Starbucks. What I discovered is that the big time complainers are almost universally talking about their: “Medicare Advantage” insurance being cancelled. Why? Because the subsidy that made many of the Medicare Advantage plans virtually free (you do have to pay for the: “Part B” coverage).

    The new Medicare Advantage Plans have high monthly costs and more restrictive networks. Of course these plans are not available to anyone under 65.

    FWIW: I have my own problems with the Medigap and Medicare Advantage policies — the liability, once Medicare has set the price and paid the 80%, is quite limited. Yes there are catastrophic potentials but that is not the norm.

  3. Tyler Healey says:

    “[I]f you’re non-group plan changes for the worse, it won’t be offered once the new law kicks in.”

    This is an outrage! I want to keep my sucky plan!


    • Thales says:

      Except that they weren’t sucky.

      The only thing even close to my $5K dedictible plan has a $6.5K dedictible with four times the monthy premium! Sorry, no sale.

  4. Bob Wyman says:

    A simpler summary: “If you still have the policy that Obama said you could keep, then you can, in fact, keep it. But, you probably don’t have that policy any more. It was probably replaced by a new policy after Obama made his statement.”

    What Obama said was true when he said it and remains true today. He didn’t misspeak. Certainly, he could have said more and some may say that he should have said more. But, what he said, whether or not incomplete, was correct.

  5. Th says:

    The cynical side of me wants to know if the insurance companies stealthily changed their existing individual market policies just enough over the past three years so that most would not meet the requirements necessary to qualify for grandfathering. And how many people were sold policies since 2010 that were nonconforming? Have the insurance companies spent the last three years locking down as many healthy insured as possible and gradually moved the others to plans that had to end now?

  6. ReaderOfTeaLeaves says:

    There is a huge problem right now with in-the-moment obsession.
    The first time that I heard about ‘the coming health care crisis was 1982. A friend, who was in med school, talked about projections for health care costs to rise to over 15% of GDP by 2000, and at the time, we were incredulous at that concept.

    Fast-forward through H. Clinton’s efforts to get health care legislation, now so many years ago that anyone born during her efforts has graduated from high school. Meanwhile, as those many years flew by, my friend -and other acquaintance – have been grinding away at health care policy in medical practices, on hospital boards, in law, and on med school faculty for their entire adult working lives: since the late 70s and early 80s. And over that period of 20+ years, the federal government never adequately addressed the billions spent on inefficient health care delivery, nor the serious economic consequences of millions of uninsured and under-insured Americans.

    ACA is what happens in a dysfunctional political system when one party adamantly refuses to compromise. It is far from perfect. But it has taken a scandalously long time to get even ACA, which is testament to the obscene profits to be made in a for-profit health care culture, in a political system funded by corporate interests.

    Now, we are treated to the ridiculous, absurd spectacle of Congressional committees nit-picking about websites. This, after they did everything they could to cut money for ACA implementation costs (!). Anyone who has worked on big website systems knows you need to test, test, and test some more. It’s the nature of the beast. The website is a problem, but it’s fixable. The negativity, the search for scapegoats, and what that signifies about a cavalier disregard for public health, is the deeper problem.

    As someone who has watched for a generation while health care costs burgeoned, watched several friends bail from health care careers because they were so frustrated, and watched others toil for years to collect data, building systems for better health care delivery, and trying to live by their Hippocratic Oaths, the current nonsense in D.C. Constitutes political malpractice. But it is also media malpractice in too many cases.

    After watching friends settle for ACA as ‘progress’ over the years of political opportunism and neglect that preceded it, IMVHO we are finally watching Congresses *worst*, most disreputable, hour. And considering what we witnessed last month, that is really a grim observation.

    Compared to Congress, the governors of Kentucky (a Dem) and Idaho’s Butch Otter (Rep) look like shining beacons of statesmanship. By implementing state Exchanges, both are showing more leadership than Congress. I also strongly suspect that political leadership in those states will function like a magnet to attract medical talent.

    • Jared Bernstein says:

      Very well said, RoTL. Like we used to say, ‘from your lips to Buddha’s ears.’

    • smith says:

      “Anyone who has worked on big website systems knows you need to test, test, and test some more.”

      Anyone would, yes, but the person in charge obviously wasn’t just anyone. To your point, it must have been someone who has not worked on big website systems. The why and how is relevant to fixing the current problem, both technical and managerial.

      Things we would know with more information:

      Was Obama deliberately kept in the dark about problems? If so why? If not, what did he do about it?

      Did the Secretary of Health and Human Services mess up bad enough to be fired? (each succeeding day of difficulty adds more weight to those who see an inevitable resignation)

      Was there an over reliance on outside contractors and consultants?

      Did engineers and managers lie about feasibility of design changes and deadlines in order not to share business with other vendors?

      When will the site operate properly? When will we know when the site will operate properly? What is the nature of remaining difficulties?

      How can this be prevented from happening again?

      What is the cost of the project failure in dollar terms, overtime, extra contract work? What are the terms of the contracts, are corrective measures provided free to fix what shouldn’t have broken down in the first place?

      How can maintenance of the system not continually reward the bunglers who created it? What are the projected costs?

      What are the costs compared with successful state systems?

      What is the impact of people, especially young healthy people, not being able to sign up? How many have already? How does this compare with state system figures?

      Why are the ACA programmers better at keeping secrets than the NSA?

      “The website is a problem, but it’s fixable.”

      Yeah, when?

      If the 2014 midterms become a referendum on Obamacare, history now hinges on a group software programmers struggling to debug code.

      • readerOfTeaLeaves says:

        This is an econ blog.
        I don’t think it is productive to get too weedy about website design, but I do think in view of your detailed questions a courteous response is in order.

        I don’t know the details of the contract for the federal exchange website. I don’t know the complexity of the database systems it needs to interact with, but it’s a very simple guess that with so many states opting to join the federal exchange, the complexity increased by magnitudes.

        I don’t know how many code languages have to be integrated to make this system work. And I have no idea who was available in the hiring pool to work on this project.

        It’s not enough to simply ask, “Does the website work?” The more relevant questions are: does it work on Win IE 8.0? on iOS 6? on various versions of Chrome? Et cetera…

        Which raises the question: why is a Congressional committee micromanaging website details?

        If they were serious about wanting Internet technology to serve the public, they’d have started by bringing in technical experts to help get them up-to-speed on technical basics. They might consider how to provide public services in a very diverse, multicultural, vast nation in the 21st century. But instead, we are treated to the spectacle of Congressional members who are so ill-informed that they can’t even ask cogent questions. It’s embarrassing.

        FWIW, I have zero interest in whether the President was ‘kept in the dark’.
        Ditto the Sec. of HHS.
        Good managers delegate; they don’t micromanage.

        Meanwhile, at least two governors appear to have overseen the creation of statewide exchanges. Could the committee learn something by inviting those governors – a Democrat from Kentucky and a Republican from Idaho – to explain how the ACA is rolling out in their respective states?

        Again, this is not a blog about website configuration, nor website costs or contracts. It is a blog about economic policy. Dr. Bernstein has the patience of a saint to put up with some of us commenters.

        To get back to economic policy, I’d argue that focusing on how to implement ACA at the state level – as Kentucky and Idaho are doing – will offer an economic advantage in the 21st century.

        Health care policy has huge, far-reaching economic implications. To get hung up on website brouhaha is incredibly inefficient, short-sighted, and costly. It is to miss the forest because you are looking at one cell on one leaf of one branch of one tree; it strikes me as incredibly inefficient and counter-productive.

        There are bound to be problems with ACA — but I strongly suspect that governors willing to show leadership on ACA are more likely to enhance the economic environment for their respective states. And that’s what we ought to be focused on: the linkages between sensible health care provision and economic productivity.

      • Red says:

        I thought the 2012 election was a referendum on Obamacare.

  7. Bill in NC says:

    From news articles it’s clear younger & healthier workers want to keep their catastrophic plans, with as low a monthly premium as possible but high out-of-pocket maximums.

    But under the ACA they now can purchase those plans only if they meet an income test.

    So instead of keeping their pre-ACA plan which cost $100/month they now must pay $350/month for the bronze level ACA-compliant plan.

    Sure, it’s a better deal IF they get sick, but many simply won’t sign up given such a delta in monthly premiums (the ‘penalty’ is trivially easy to avoid)

    Remember we need millions of younger workers purchasing _unsubsidized_ plans to pay for older, statistically sicker workers like myself.

    But I don’t see how this “take your medicine” approach will convince the above demographic to participate.

    • Michael Drew says:

      Well-said. I’m an Obama supporter and supported ACA on the principle that comprehensive reform was necessary, and getting the Congress to move off the the status quo was necessary to make any other future reforms possible. But it terms of the prospects for actually making this particular scheme work, from the way it looks to me, the administration has got to absolutely quaking in its boots right now. Even if they get the numbers needed to make it work, they’ll then be facing a backlash against the new cost reality that young workers outside of major employers face that will make 2010 look like a ripple. I don’t say that with relish; I want the Dems to do well for all kinds of reasons. But this looks like real trouble for them for a long time to come.

      Part of me thinks Medicare for all ought to have been the goal, and if it failed, then it could have been an issue to bring to voters and win elections on until it was accomplished. Another part of me wonders if something somewhat more limited in scope, such as candidate Obama’s initial plan, might have caused fewer disruptions while still covering a lot of people and introducing needed treatment and cost reforms. I don’t know.

  8. Perplexed says:

    The website will get fixed. The non-conforming policies being used by a tiny fraction of the population will disappear and those buying them will end up with better coverage. If the entertainment news shows weren’t profiting so handsomely from the battle, might we be talking about something like this instead?:

  9. Perplexed says:

    The website will get fixed. The non-conforming policies being used by a tiny fraction of the population will disappear and those buying them will end up with better coverage, (probably at a better rate

    If the entertainment news shows and their advertisers weren’t profiting so handsomely from the battle, might we be talking about something like this instead?:

    • Perplexed says:

      Sorry about the duplicates – thought the internet worked perfectly unless you were trying to sign up for Obamacare.

  10. The Raven says:

    My guess is that the people who are being heard on this are relatively healthy people 50-65 years old, making a bit too much money for a subsidy but squeaking by, and discovering that the new plans available cost something like a quarter of their income.

    The subsidy shuts off at too low an income level for people over 50.

    Now, these aren’t the people hurt worst by the ACA implementation–those are working poor with incomes at 100-133% of FPL in states that have not implemented the Medicaid expansion. (There’s a million people in Texas who are going to be left out in the cold by the failure to expand Medicaid.) They aren’t even the group that’s hurt second worst; that would be the people who are just over 133% FPL who can barely make ends meet as it is and for whom even subsidized coverage is going to hurt–will probably make some of them homeless. But the group I mentioned in my first paragraph is white and middle class, and they get airtime.

    The unambiguous winners of the system ordered by the PPACA are the health insurance companies, big pharma, and the medical device manufacturers. The rest of us, some are winners, some are losers.

    And when the next elections come around, we know who’s going to be angry. Thanks, Obama.