Friday, February 7, 2014

Is Obamacare Unraveling?

Rumors have been circulating in the marketplace all week that the administration was thinking of extending the individual health insurance policies that Obamacare was supposed to have cancelled for as much as three more years.

Those rumors have now come out into the open with Tom Murphy's AP story that began running today.

That the administration might extend these polices shouldn't come as a shock. My sense has always been that at least 80% of the pre-Obamacare policies would ultimately have to be canceled because of the administration's stringent grandfathering rules that forced almost all of the old individual market into the new Obamacare risk pool.

But with the literal drop dead date for these old policies hitting by December 31, 2014, that would have meant those final cancellation letters would have had to go out about election day 2014. That would have meant that the administration was going to have to live through the cancelled policy nightmare all over again––but this time on election day.

The health insurance plans hate the idea of another three-year reprieve. They have been counting on the relatively healthy block of prior business pouring into the new Obamacare exchanges to help stabilize the rates as lots of previously uninsured and sicker people come flooding in. With enrollment of the previously uninsured running so badly thus far, getting this relatively healthier block in the new risk pool is all the more important. The administration's now doing this wouldn't just be changing the rules; it would be changing the whole game.

Republicans, and a few vulnerable Democrats, had essentially called for this last fall when legislation was floated in both the House and Senate with the "If You Like Your Policy You Can Keep It," proposals. At the time, the administration and Democratic leaders rightly said if this sort of thing would have been made permanent it would have a very negative impact on what people in the new pool would pay––and on their already high deductibles and narrow networks.

At the beginning of this post I asked, Is Obamacare unraveling?

First, as I have said before on this blog, the law's reinsurance provisions will mean Obamacare can keep limping along for at least three years. And, even making this change won't alter my opinion on this. It will just cost the government more reinsurance money to keep the carriers whole.

By asking if it is unraveling, what I really wonder about is the whole sense of fairness in the law and the expectation that everybody needs to get the Democrat's definition of "minimum benefits" whether they want them or not.

Obamacare has created a well-documented market that is heavy in mandated minimum benefits but also as a result impacted by big deductibles, narrower provider networks, and higher premiums.

Those people in pre-Obamacare individual market policies don't have the big benefit mandates but they generally also have smaller deductibles, wider networks, and lower premiums.

And, what about the much larger small employer market that is now being forced into the same Obamacare mandates often resulting in much higher premiums and deductibles? Do they get a reprieve––many of them have also deferred their compliance by using the carriers' early renewal programs?

Would it be fair to make almost indefinite a two-tiered health insurance system with some people being able to keep their old policies but prevent others from getting them?

This might be one of those you can't win for los'in moments for the administration. Stay on the cancellation track and make lots of people mad one more time on election-day or grant another three-year reprieve and make the people you forced to buy the new plan wonder why they can't have the policy their neighbor across the street has.

When the President last October called on health plans and insurance commissioners to defer the cancellations for one more year, was it the beginning of the unraveling of all of the stringent individual health insurance market requirements in Obamacare? Would this new change to defer these cancellations for another three years just be step number two in that process?

Is Obamacare, with its clearly liberal versus free market view of what an insurance market should look like, on its way to unraveling?

As long as I have your attention, I will update you on a few other market happenings.

How many of the people who bought health insurance for January 1 have paid for their policies?

My review of carriers tells me the number of people who paid, and therefore whose enrollment was not cancelled as of January 1, lies somewhere between 70% and 85% depending on the carrier. The smaller plans are tending to have a better result and the larger plans the worse result. Perhaps because the smaller plans have had a better handle on the messy exchange enrollment just because they had fewer enrollments to deal with.

My informal survey can't be too precise, but I can say with pretty good confidence that based upon the drop-outs so far, about 20% of the 3.1 million people the administration has said have enrolled through January are not going to stick. That means the real number is closer to about 2.5 million.

Some of this attrition is due to people not paying their bill because they decided not to buy after all. Some to people signing-up twice and just paying once–– can't handle duplicate enrollments! Some of it may be due to people wanting coverage but they never got their invoice in all of the January administrative mess. Until the dust settles we really won't know.

Last fall I said that I thought it would be late January or early February before would generally be fixed.

Boy, was I wrong.

The to-do list still includes:
  • Problems with the government sending enrollment transactions to the carriers––the 834s––that are still having error rates much too high for high volume processing.
  • The inability of the government to do an automated enrollment reconciliation with the carriers––to be able to sort out who really is covered and who is not––because that system still hasn't been built.
  • The inability of the government to pay carriers because that system hasn't been built––carriers are sending estimated bills to the feds.
  • The inability of the government to add and delete people from the system for things like a newborn or a divorce because that system hasn't been built yet.
  • The inability of the government to handle appeals when people think their eligibility or subsidy calculation is wrong because that system hasn't been built yet.
  • The inability of the government to cancel people off of because they never built that functionality. As a result, I expect they will be reporting bloated enrollment numbers for some time.
At least two carriers have told me that because the government can't cancel people off the system, it the person shows up next month they can't reenroll on because the government can't get the old enrollment off the system.

Then there is the question of how many people signing up on the Obamacare exchanges previously had health insurance? Asking different carriers yields different answers. Most often they only know if they had the person on their rolls before––maybe they were with another carrier. The information I am getting is that anywhere from 50% to 80% of the enrollments are from people who either had their prior policy cancelled or had a policy before but chose to give it up because they could now get a subsidy that made the cost of coverage cheaper for them.

In an earlier post I told you that published reports that put the number of reenrollments at about two-thirds of the Obamacare exchange enrollments sounded about right given my own discussions with carriers. Two weeks later I haven't heard anything to change that assessment.

February 10 Update: The federal government has announced that can now make change of life updates to an enrollees coverage as well as cancel coverage. However, as the Washington Post has reported, this functionality is still not operating reliably.


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