Obama's Ad Hoc ACA 'Fixes' Mean Millions Will Go Without

The White House has changed the rules again. Faced with a website that is still not up to the task of enrolling people in government-approved health plans, the administration has secretly given the public an extra day to sign up for Obamacare.

Officially, anyone wishing to purchase health coverage through the federal exchange by January 1 must enroll no later than December 23. The Washington Post reports that a one-day extension was built into the computer software, giving consumers until 11:59 p.m. on Christmas Eve. One more shopping day will not overcome the Affordable Care Act's fatal flaws.

This is the latest in a series of stop-gap measures intended to save the President's health reform from an unprecedented collapse. What might seem like a problem with marketing-the failure of healthcare.gov to allow consumers to pick a policy-is only the tip of the iceberg.

You Can't Sign Up for Coverage

After more than 3 years of work and hundreds of millions of taxpayer dollars, the federal exchange website was not ready on October 1. Following a few weeks of denial, Jeff Zients was brought in to supervise repairs that were supposed to be completed by November 30. That was a line in the sand that could not be crossed, until it had to be.

Within days, HHS Secretary Kathleen Sebelius had to admit that continued website problems would force people to try in off-peak hours. The White House delayed the final enrollment deadline for persons wishing to be insured at the beginning of the new year-from December 15 to the 23rd, and now the 24th.

Not surprisingly, the dysfunctional federal website has kept enrollment figures low. By the end of November, 137,204 people were able to select a health plan on the federal exchange. Including enrollment through the state exchanges, the total was 364,628.

The numbers apparently have improved somewhat in December. In his year-end press conference, President Obama said "more than 1 million Americans have selected new health insurance plans through the federal and state marketplaces" since October. That is a far cry from the 3.3 million initially expected by the administration to enroll in exchange plans by December 31 or the 7 million expected to enroll by the end of March.

Even those numbers exaggerate the performance of the insurance exchanges. Many, perhaps most, of those people have neither paid the first month's premium nor received an insurance card. HHS continues to have difficulty transmitting accurate information to insurers, which can lead to delays and cancellations. Until those problems can be resolved, consumers are not insured.

Moving the final enrollment date to December 24 makes this problem worse. Under the best of circumstances, insurers need more than a week to process the paperwork, bill the customer, and update the information that doctors and hospitals can access to verify that a patient has coverage. If a large number of people try to buy on the exchanges just before Christmas, insurers will need weeks or months to resolve errors and complete enrollment.

The industry is clearly worried. People with high health needs have a strong incentive to work through the website problems and enroll. Younger, healthier people who place less value on coverage are not likely to come back to the exchange site if their first attempts were unsuccessful. Giving people more time to enroll gives them more time to procrastinate. That shifts the balance toward higher-cost enrollees.

Premiums were set for 2014 assuming a mix of low- and high-cost enrollees, and those rates cannot be adjusted. If enrollment falls short of expectations, losses could be substantial-and plans are likely to drop out of the exchange market next year, leaving consumers with fewer and more expensive choices.

You Can't Keep Your Coverage

Millions of people who buy their own health insurance were shocked to receive cancellation notices this fall. That was no accident. The ACA established strict grandfathering rules that made it unlikely that plans sold on the individual market could remain available in 2014. Even minor changes in deductibles and copayments result in the loss of grandfather status.

By next fall, virtually no policy now available on the individual market can continue to be sold. Or that would be the case if the administration chose to enforce the law.

On November 14, the President announced that consumers whose health plans have been cancelled could keep them for another year-but only if insurers and state regulators would agree. Otherwise, they would have to purchase a new health plan that could be more expensive and may not offer the same access to providers as the old plan. HHS would simply not enforce requirements that all insurance cover a wide range of costly benefits.

This ill-considered fix was not well received, particularly by the biggest ACA supporters among the insurance commissioners who want to keep the exchange risk pool intact. The National Association of Insurance Commissioners argued that the cost of exchange plans would escalate if healthier consumers kept their less-generous current policies instead of moving to the exchange.

Seeing this idea fail, the administration tried another gambit. On December 20, HHS created a new "hardship" exemption from the individual mandate to purchase insurance. Anyone whose insurance was cancelled and who decided that other plans were unaffordable would not be subject to the penalty, which amounts to $90 or 1 percent of income in 2014. It appears that anyone who is cancelled can simply refuse coverage without providing proof that available plans are expensive.

This scheme is too clever by half. People who buy their own coverage in the individual market pay the full premium with no subsidy, unlike the majority of Americans who get a tax break when they enroll in their employer's plan. They clearly want coverage and are willing to pay for it, as long as they can afford it. Since the hardship exemption does not give them insurance protection, very few will take it up and none of them will be happy about it-an embarrassing situation for an administration that fancies itself the champion of the disadvantaged.

The administration bent the rules further to avoid criticism that the ACA had stranded millions without health coverage. To accommodate people who lost their insurance but cannot afford what is available on the exchanges, the administration will now allow anyone to purchase "catastrophic" coverage. Until last week, only people under 30 years of age or those whose alternative plan costs more than 8 percent of their income could buy a catastrophic plan, which is supposed to be the low-price alternative.

The problem is that this insurance is, well, catastrophic. It requires enrollees to pay $6,350 (or twice that for a family) before it covers any medical expense other than 3 routine office visits. Anyone purchasing catastrophic coverage is ineligible for an exchange subsidy. And the premium is not much cheaper than for a "bronze" plan.

That is not much of a concession to people with modest incomes who are doing their best to avoid being a burden on the rest of society.

This is bad news for many of the 17 million people who buy their own insurance. It is also a warning to the rest of us. HHS estimates that two thirds of small employer health plans and nearly half of large employer plans will lose their grandfather status by 2013. Moreover, employers are already cutting back on health coverage in anticipation of the "Cadillac tax" on overly-expensive coverage. That means we can all look forward to paying higher premiums for less coverage and reduced access to physicians and other health care providers.

The Beginning of the End

The Obama administration has spent the last 3 years altering inconvenient provisions of the Affordable Care Act. Deadlines have been ignored, and requirements have been deferred before they could take effect. Congress has not been consulted, even when Republicans agreed with the administration's position.

That is not going to change. But past modifications set a precedent that is hard to ignore.

The delayed employer mandate is a good example. In the guise of deferring reporting requirements, the administration gave employers a year to decide whether it is advantageous to simply eliminate their employees' health benefits and pay a penalty. What are the chances that the administration will re-impose the mandate in 2014, an election year?

Similarly, people who have had their insurance cancelled will not be charged a penalty if they do not buy insurance, delaying enforcement of the individual mandate for a year. What is the argument for imposing a penalty on anyone else who does not have insurance?

These ad hoc changes in the ACA threaten to destabilize the insurance market. Insurance actuaries developed their premium bids based on the rules that the administration has promulgated over the past 3 years. The White House abruptly changed the rules over the past 3 months, when their political consequences could no longer be ignored. As a result, millions of people will start the new year without health coverage, and insurers and providers will be expected to cover their costs with no guarantee that they will be repaid.

A Washington Post editorial characterized the situation well: Not everyone was going to win under health-care reform, and not everyone can win if the system is to work. At this point, it is difficult to see who will come out a winner.