As Predicted, ObamaCare Plunges Into ‘Utter Chaos’Posted: December 28, 2013 | |
Michael F. Cannon writes:
“HHS maintains they’ll have these [Exchanges] up and running by October 2013. I don’t know anyone who is confident about that and I’m ready to predict that they will not.” — Michael F. Cannon, December 2012
“In my opinion, what’s going to happen is utter chaos.” — Cato Institute senior fellow Jagadeesh Gokhale, February 2013
“With no clarity as to when people should sign up and who they should pay and when, it’s a virtual certainty that many consumers will find themselves uncovered for a period of time through no fault of their own.” — Senator Orrin Hatch (R-UT), December 2013
My December 2012 prediction that ObamaCare’s health insurance “exchanges” would not be ready on time proved true by July 2013, when President Obama unilaterally delayed the law’s employer mandate for a year. It proved painfully, obviously true when the Exchanges crashed upon takeoff on October 1, just as ObamaCare was throwing millions out of their current health plans.
My colleague Jagadeesh Gokhale‘s February 2013 prediction of “utter chaos” (audio here, at 48: 25) arguably proved true in October, and is now evident in President Obama’s decision to exempt from the individual mandate those millions whose plans Obama himself cancelled.
This categorical exemption is a bigger deal than it seems. With it, President Obama has admitted ObamaCare will strip many people of their health insurance and leave them with gaps in coverage, or no affordable coverage options at all. It is an implicit admission that ObamaCare has created economic peril for millions of Americans and political peril for Democrats.
Things weren’t exactly going well for ObamaCare anyway. There has been no shortage of votes to repeal the entire law, at least not in the House of Representatives. President Obama has signed into law bipartisan bills repealing one of ObamaCare’s three new entitlement programs; gutting its Consumer Operated and Oriented Plan (CO-OP) program; cutting spending on the law’s Prevention and Public Health Fund; repealing its “1099″ reporting requirement (a new tax); twice increasing the amounts that recipients of Exchange subsidies must repay if they incorrectly projected their future income; repealing the law’s “free choice voucher” program; and rescinding some funding for the law’s Independent Payment Advisory Board. Obama had unlimited authority to throw money at states to encourage them to create Exchanges. Still, 34 states refused. He raided nearly half a billion dollars from Prevention and Public Health Fund in order to fund federal Exchanges in those states. Still, the federal Exchanges were a disaster. ObamaCare lost before the Supreme Court, which ruled the law must hold harmless states that refuse to implement ObamaCare’s Medicaid expansion; 25 states have since refused. (To get those states to enact at least part of the expansion, President Obama is coercing them in direct contravention of the Court’s ruling.) Obama unilaterally delayed for one year the employer mandate; multiple anti-fraud provisions; a requirement that small businesses offer their workers a choice of plans through “SHOP” Exchanges; online enrollment through SHOP Exchanges; and limits on cost-sharing in employer plans. In his most egregious attempt to save the law by unilaterally rewriting it, Obama is trying to impose a $700 billion tax burden on the American people that Congress never authorized. Citing difficulties with the law’s web sites, Obama has repeatedly pushed back deadlines for acquiring coverage that will take effect on January 1, and for satisfying the individual mandate. He pushed back the start of the “open enrollment period” for coverage in 2015 until after the congressional elections in early November 2014. Obama even offered to let some people whose coverage had been cancelled restore those old health plans, despite the fact that they are actually illegal under federal law. Obama’s repeated assurances that “if you like your health plan, you can keep it,” that you can keep your doctor, and that premiums would fall, are widely recognized not just as untrue, but as lies. ObamaCare’s popularity rating hit a new low in December 2013, with Americans opposing it by nearly a 2-to-1 ratio. It has lost the support of women (60-35 percent opposed) and the uninsured (50-24 percent say it’s a bad idea) . Even when the president’s responses to ObamaCare’s inadequacies are not illegal, they tend to destabilize the law further or increase its cost.
This time, President Obama announced, just days before the deadline for purchasing coverage with a January 1 effective date, that he would offer a categorical “hardship exemption” from the individual mandate to anyone who had their insurance cancelled due to ObamaCare. The White House guesstimates only half a million people will qualify, but the number may be closer to 5 million. (Former Congressional Budget Office director Douglas Holtz-Eakin predicts “a black market for fraudulent cancellation letters.”) If these folks choose not to buy health insurance, they will not face a penalty. They will also have the option to buy, “if it is available in your area,” the lower-cost catastrophic coverage that ObamaCare otherwise offers only to people under age 30, or who receive the separate “unaffordability” exemption from the mandate.
The obvious purpose of this policy is to give political cover to Senate Democrats who must face the voters next year, and are no doubt afraid of attack ads like this one. The last thing Obama wants is for the Senate to give House Republicans a chance to reopen ObamaCare. So when a handful of Democratic senators demanded that the administration do something about all these people whose policies have been cancelled, Secretary of Health and Human Services Kathleen Sebelius announced the policy in a letter to one of those senators and in a bureaucratic “bulletin.” Quietly, as if they didn’t want too many people to know.
Yet this exemption may not be of much value to those who qualify, and is likely to create more problems for ObamaCare supporters than it solves.
Cold comfort. The people who qualify for this exemption don’t actually want it. They want health insurance. They had affordable coverage, until ObamaCare took it away from them, and that’s what they still want now. Sebelius boasts that ObamaCare’s catastrophic plans cost 20 percent less than other ObamaCare plans, but don’t confuse that with affordable coverage. The Manhattan Institute’s Avik Roy — who is now the opinion editor for the sprawling Forbes empire – notes that ObamaCare’s catastrophic plans can still cost twice as much as what was previously available on the individual market.
But even if they like their catastrophic plan, they can’t keep it. Sebelius has complete control over the duration of the exemptions, which she has described as a “temporary” step “to smooth [consumers’] transition” to enrollment in Exchange plans. So in a matter of months, Obama will violate his “if you like your health plan” pledge again by kicking these folks out of their catastrophic plans. They will get another cancellation letter tossing them into the Exchanges. Their premiums will surge again. They may lose their doctor again.
Destabilizing ObamaCare’s risk pools. The exemption means insurers will suffer losses this year, and rates will be higher next year, for all ObamaCare plans.
The president argued before the Supreme Court that ObamaCare’s regulatory scheme cannot work with out the individual mandate. Yet he has now exempted millions of the very people he most needs to comply with it. This exemption siphons good risks out of the Exchanges and destabilizes the risk pools for both the standard ObamaCare plans and the catastrophic plans. Participating carriers set the rates for their Exchange plans with the expectation that these folks would be purchasing bronze, silver, gold, and platinum plans through the Exchanges. But the healthiest members of this now-exempt group are the most likely to go uninsured or purchase a catastrophic plan. So Obama’s blanket exemption makes those risk pools older and sicker.
This blanket exemption also destabilizes the risk pools for the catastrophic plans. It opens those pools to lots of people over age 30, who have higher health expenses than people under age 30, and whom the insurers were not expecting to buy catastrophic plans when they set those rates.
Political problem #1: credibility. The exemption further undermines Obama’s credibility on health care because he is allowing millions to purchase a type of health plan that his administration has denounced because they don’t provide as much coverage as ObamaCare’s vaunted Exchange plans. Sebelius has derided ”very high catastrophic plans that don’t pay for anything unless you get hit by a bus” as unworthy of being called “health insurance.”
The exemption is also an admission that, contrary to Obama’s assurances, many previously insured Americans may not be able to find “an acceptable replacement” for their cancelled policies, in part because ObamaCare has made coverage “unaffordable.”
This exemption also shows Obama is not interested in bipartisanship. Just as Republicans would have worked with him to delay the employer mandate, they would have happily worked with him to craft an exemption to the individual mandate. In both cases, the president took drastic, and possibly illegal, action to avoid working with Republicans. (It may yet dawn on Obama that he is the reason we don’t have a “normal political environment.”)
Political problem #2: inequity. It is completely unfair for the president to exempt the previously insured but not the uninsured. Ezra Klein writes: “A 45-year-old whose plan just got canceled can now purchase catastrophic coverage. A 45-year-old who didn’t have insurance at all can’t. Why don’t people who couldn’t afford a plan in the first place deserve the same kind of help as people whose plans were canceled?” Expect the uninsured and their members of Congress to agitate for expanding this exemption, which would further undermine the delicate balance of implicit transfers ObamaCare’s Exchanges hope to achieve.
Political problem #3: further cancellation notices, rate shock, etc. As noted above, this exemption is only temporary. There will be lots more grumbling on Capitol Hill when these exemptions run out and people start getting cancellation letters. The president can suspend those cancellations until after the November 2014 elections, but they are coming and he can’t keep them from becoming an issue in those elections. Republicans and “outside” groups will see to that.
Political problem #4: another straw on the insurers’ backs. The health insurance industry has been remarkably supine as the Obama administration’s incompetence threatens to cost them millions of dollars. All that Kathleen Sebelius has to do is “strongly encourage” insurers to pay claims for people who haven’t paid a dime in premiums — something the law gives her no authority to do or even to request — and the industry snaps-to. Nobody knows when individual health insurance carriers will run out of patience with ObamaCare and the administration, but this exemption brings that day closer.
I agree with Nicholas Bagley that this exemption is probably legal. Or at least, it comports with the statute, which gives the Secretary of Health and Human Services the power to exempt people from the individual mandate if they experience “a hardship with respect to the capability to obtain coverage under a qualified health plan.” Bagley basically argues that potentially millions of people may now find coverage unaffordable because they believed the president when he lied to them about ”if you like your health plan, you can keep it.” Having planned their finances around that promise, they are now suffering a hardship with respect to the capability to obtain coverage. I find Bagley’s argument troubling, because it implies that the more the president lies, and the more harm his lies cause, the more power he has to issue hardship exemptions. (It’s a little like when the administration argued in NFIB v. Sebelius that Congress had the power to impose an individual mandate under the Constitution’s “necessary and proper” clause because the rest of ObamaCare created so many problems that Congress had to enact the mandate to fix them. The Supreme Court rejected this idea, holding that Congress cannot “create the necessary predicate to the exercise of an enumerated power.”) But at this point, I don’t think this fix violates any laws.
Until Congress repeals ObamaCare, this is what health care will look like in America. Republicans will complain when Democrats jerk your health plan hence. Democrats will complain when Republicans jerk your health plan hither. Presidents from both parties will push the executive’s discretionary powers up to and beyond their lawful limits. Democratic and Republican presidents will “strongly encourage” insurers and health care providers to do things that no law requires, such as pay the medical bills of patients who have not paid a single premium, and the beholden insurers and providers will comply “voluntarily.” Republican and Democratic presidents will withhold information about their own performance, so there is no way to verify its own stellar self-assessments. Still, ObamaCare is definitely not a government takeover.
ObamaCare supporters are sure the Obama administration will be able to sort all this out. Then again, they pooh-poohed predictions like Gokhale’s and mine, and the most prominent among them have deliberately said things they knew to be untrue to enact and to protect this misbegotten law.
- Obama Repeals ObamaCare (punditfromanotherplanet.com)
- ‘We Screwed the Duck’: CNN Really Misheard Obama’s Health Care Apology (punditfromanotherplanet.com)
- Will Obama care create ineffective Fire Departments? (americanforchange.com)
- Two States Stop Payment to Obamacare Website Developer (legalinsurrection.com)
- Here comes the ObamaCare tax avalanche (humanevents.com)
- ObamaCare Is Dead (dickmorris.com)
- What the Numbers Say About Obama’s Health Care Law (dailyfinance.com)