The Greater Grandfathering of old policies in the ACA
The many cases of people receiving cancellation letters from their health insurance companies which include the claim that the policy will be cancelled as of Jnuary 1 because of the ACA and which offer insurance at much higher premiums have caused a political crisis for Obama nd other Democrats.
I have a number of confused thoughts on the issue. The bottom line is that I am enthusiastic about the Landrieu/Merkeley proposal (dclick the link the post is excellent) for reformed reform.
I will start with policy — what is to be done.
One option is to stay the course, weather the storm, grow a spine and check guts.
This is probably the best option for the health care system and the party, but I will assume it isn’t. This may be the time for character not an effort to come up with clever ideas, but I will stick to my comparative advantage which sure isn’t guts.
The ACA mandates insurance for almost everyone and defines a minimum level of helth insurance which counts (this is clearly necessary or else the mandate would be meaningless). Policies which are not up to ACA standard are in fact being cancelled. The ACA also says that any plan which existed when it was signed into law counts as health insurance. Existing plans were grandfathered. Obama referred to this provision when he (accurately using th e present tense) said in 2009 that “If you like your health insurance plan, you can keep it”. But the definition of what is an old grandfathered plan and what is a new plan (signed by the same policy holder and insurance company) is very complicated (HSS FAQ anfter FAQ addresses the question). One possible reform proposal would be to replace the phrase amounting to “when the PPACA act is signed into law” with “November 9 2011” say. This would make the almost universal interpreation of what Obama said in 2009 true too.
A problem with this re-reform is that it is hard to draw a line — once you start moving a deadline it is hard to stop. I don’t think this is a serious problem given the numerous US veto points. Another is that those who will keep their old policies are medically screened and don’t have pre-existing conditions. Here I think advocates of staying the course almost contradict themselves saying that further grandfathering will seriously increase the cost of insurance offered for year after next on the exchanges and that very few people are financially hurt by ACA cancellations given the low premiums charged on the exchanges and subsidies. The argument is that a modest amount of money times a small number of people is a huge amount of money.
I disagree with Kevin Drum and Josh Marshall at the same time (this may be the first time in human history if anyone cares)
Mashall ( and Drum in the ])
if] you don’t get everyone into the system with at least a base level solid policy there just isn’t enough money to cover the sick and the ‘bad risks’ of people with pre-existing conditions.
One factual and political point that is getting very little attention is just how many people are affected — people losing policies who will need to pay substantially more without subsidies. This is a critical point and I’ve seen virtually no reliable data. It’s all been a political fog. It is clearly a very, very small part of the population
OK Josh and Kevin explain to me how eliminating moderate losses for a “very, very small part of the poulation” implies that there “just isn’t enough money”.
It’s a small issue so the political cpsts f staying the course will be low (once the dust settles) but it’s a huge amount of money the loss of which will deestroy the exchanges- Hmmm how can a policy which financially benefits “very, very” few people cost so much ? The allternative is them paying a few hundred a month for insurance on an exchange. Note that many people will foolishly stick whith their bad insurance if they can even if they could get a much better deal on the exchanges. This will reduce the cost of providing insurance on the exchanges not increase it.
The policy argument against Landrieux/Merkely seems to rely on impossible arithmetic.
OK now politics. I think Democrats of roughly my age (Marshall is considerably younger but clearly was precocious) tend to small c conservatism as we tend to assume that Democrats will find a way to blow it — that congressional Democrats will be in disarray and that blue dogs are just waiting to stab the party in the back and side with Republicans. Well things have changed. Most Blue dogs and conservadems aren’t working in Washington anymore. Democrats have been in array. In contrast Republicans have been fighting each other.
The ptimal strategy for a less totally undisciplined than the other guys party is not to keep it simple. It is easy to spread confusion in the camp of the political adversaries. Note that Uber Commissare Grover Norquist has already denounced ACA reform reform as has raging redstater Erick Erickson
It is very very easy for Democrats to write “you can keep your insurance” bills with poison pills. The problem with the re-reform is that, if one isn’t careful, one can bankrupt the health insurance industry (without setting up single payer to replace it). As I note below, pleasant sounding proposals which are terrible policy for this reason are extremely politically useful.
A bill in which the “you” in “if you like your plan” refers to the policy holder and not the two consenting adults (the policy holder and the insurance company employee) could be extremely costly for insurance companies. In particular, to be meaningful, keeping your plan means that the amount that premiums can be increased is regulated (say equal to the growth of per capita health care spending or something). This would be arbitrarily taking huge amounts of money from insurance companies who reply on cancelling plans (after the year expires) for people with expensive conditions.
GGrabbing a lot of money from insurnce companies and giving it to policy holders would be super popular. Also it will not ever happen — the insurance companies will find a way to block it probably with the votes of their Republican buddies.
A terrible but nice sounding reform proposal is a good way to make Republicans own the problem. Now it will reduce campaign donations from some insurance companies to some Democrats, but since the plan isn’t to get a bill signed, party unity is not needed (and wouldn’t be enough to pass a bill anyway of course).
I say go for it.
udate I am not sure I think the Landrieu bill is good policy (which I admit I haven’t read). A key part of my proposal is that money not spent on subsidies because people stick with the grandfathered plans must not return to the Treasury but must be assigned to a trust fund for future subsidies. Otherwise people who foolishly stick with old plans when they could get a better deal will cause a lower national debt but not improve the finances of the exchanges. It will not be possible to get that money back from the Treasury with a later bill.
Now all of this is just policy. I am sure that Republicans will not suport bill which imposes heavy costs on insurance companies. I’d add that another change I would make in the Landriu bill is that the “you can keep your policy” should last for more than a year with restrictions on how much premiums can be increased. The idea is to include a populist poison pill so voters love the bill and Republicans hate it.
Robert it is late here and I am tired but I think I enthusiastically agree. Assuming my skim over actually captures your message.
Seems to me that we have two populations that Drum and Marshall are confusing:
The underinsured facing a premium increase.
The uninsured because ‘Invincible’ or unaffordable.
Giving the former a break on the mandate would not seem to have any necessary effect on the latter. And the former are at least paying something in, and in the scheme of things too much for their actual coverage. But who cares really, because what we want is to have the healthy uninsured and the uninsurable to sign up. Because both would be contributing in their own way to previously uncompensated care whether considered from the provider or the overall system perspective.
On the other hand the underinsured are a prime marketing target, at some point the better service per dollar ratio of being fully covered will likely kick in for them. In the meanwhile there is only so much uncompensated care that they can shift to the overall system. In the cold light of day those annual and lifetime limits and possible bankruptcy risks still lay on them.
Now it might be that there is some proportion of ‘Invincibles’ who have some form of catastrophic only insurance and so are underinsured rather than uninsured. But to the degree that is true they would seem to pose less systematic risk because after all to some degree insured.
The key here it seems to me is blocking the route for the currently uninsured ‘Invincibles’ to become underinsured. And limiting exemptions to grandfathered plans would still do that, they can choose to either pay the uninsured penalty or become fully insured. And it is getting the healthy invincible uninsured covered that helps out the risk pool most, not those that for some reason feel constrained to pay enough to be underinsured. Because by that very choice they seem to have plunged themselves in a more expensive risk pool. With ACA the ultimate ladder out.
But like I said I am tired. And not just from the hour, fighting out Social Security on a couple of fronts yet again is itself tiring. And there is some of that going on tonight.
Sorry guys, but it is very difficult to unscramble eggs.
Obama either knew (or should have known) what would happen to insurance markets, his bill was intended to make a massive shift in markets.
That the administration really didn’t understand the consequences of throwing a lighted flare into a fireworks store, well, they did it anyway.
And here we are. Trying to unscramble the eggs, or trying to find some magically political advantage, well, it ain’t going to work.
I suspect they thought the grandfathering idea would work, and were wrong.
The grandfathering made it possible for an insurance company to maintain these plans, but not sensible.
Grandfathered plans are dead end products that will wind down and have to be closed pretty quickly. Individual insurance plans have very high customer turnover because most customers just aren’t in the individual market very long. If they can’t enroll new customers they will shrink rapidly. They have also historically changed a lot, making the freezes of the grandfathering another death sentence. They also suddenly become odd-men-out in the range of products the company is supporting meaning they have an extra administrative burden. All this adds up to a very bad business case for continuing such plans. Finally you, Mr insurance exec, are already doing a product line overhaul creating lots of new ACA compliant plans and restructuring to support those. It’s hard for me to imagine how one might have set things up so that they would be preserved. I suppose some large special subsidies to make it happen?
Now that the plans have already been canceled it is extra absurd to think this clock can be turned back. Re-start these plans so they can die off over the next few years? Totally absurd.
Of course the policies the ACA allowed to be grandfathered were policies that could be cancelled, modified, and made subject to recession without reference to the ACA at all. Changing that is giving these people much more than they had to begin with and really makes no sense logically whatever the financial ramifications might be. The same thing is true of people who had and wanted keep coverage through their employers. Noone suggested that such policies could be kept in place without change indefinitely. It was possible, I suppose, if the employer and insurer agreed to do it but that was so unlikely as to be unimportant.
STR while it might be impossible to unscramble the omelot, it is hard to see why offering 1 or 2% of the population the ability to substitute their reliable two eggs over will disrupt either the kitchen or the dining room unduly.
And since it seems to me that the omelot would have been more palatable if Republican governors had just agreed to pitching in on the cooking via State Exchanges rather than ‘warning’ everyone that the eggs were tainted with salmonella. Not a bad descriptor for what the Governor and Attorney General of Texas are doing today.
I saw a figure today that fully 47% of the current individual insurance market keeps their plans for six months or less. So resetting the Grandfather Date forward might still not be that big a deal if the same mechanisms that had much of the individual market get alternate coverage in a typical year still operated.
Because Rusty you and I are old enough to remember when Ma Bell offered each customer the right to have a phone in any color and style they wanted, as long as it was a black countertop or wall mounted model and hard wired. And even after the monopoly was broken and people could buy phones in any color and shape including Mickey Mouse there were still people who insited on leasing their trusty old black rotary phone from their local Bell. But nobody today would argue that the persistence of that slice of the customer base was reason to scrap all the changes since and just go back to status quo ante and so the return to the warm embrace of Ma Bell.
For the young out there. Back in the time of local telephone monopolies where most markets were served by a Bell company (though General Telephone was hanging on here and there) there was a popular bumber sticker: “We’re Ma Bell. We Don’t Care. We Don’t Have To”. Because where were you going to go? IMHO Big Insurance is in that same position as Ma Bell a few decades and some of the big carriers now: few people are really willing to subject themselves to the dicates of a private monopoly or cartel and if given other options will take them.
Just as the market for hard-wired black desktop rotary phones dried up over time.
This is just a speed bump, wait until the real change starts.
I think rural hospitals have a very poor chance of survival, for example.
And narrow and super-narrow networks will create havoc.
Employers are still trying to understand the algorithm.
For sure higher deductibles and co-pays are here and will expand.
Much of this intended but unspoken consequences.
And then there are the unintended consequences…….
Bruce, in three years time this will be old news, the system will work through it. Lots of pain for the next year or two, but it will end.
The next phases will be interesting.