Republicans needed to make Obamacare work

March 10, 2014
Back to TopCommentsE-mailPrintBookmark and Share

The Obama administration last week ruled that small businesses (and individuals) can keep their old health insurance policies that don’t comply with Obamacare’s new rules until October 2016.

That’s supposed to help Democrats in the 2014 elections, because there won’t be another wave of Obamacare-induced policy cancellations just before election day.

But if President Obama wants his health law to actually work in Republican states like Indiana, he’d better hope their insurance commissioners don’t play along with his latest delay.

Because it will actually harm the exchanges operating in their states--and harm the overall success of Obamacare,

A spokeswoman for Indiana Insurance Commissioner Stephen Robertson told me today that no decision has yet been made on whether Indiana will allow insurers to keep these old policies going until 2016. Robertson was among 21 insurance commissioners in November that declined to allow the reinstatement of pre-Obamacare policies that had been marked for cancellation.

Many expect even more commissioners to say no this time. For example, Adam Hamm, the Republican insurance commissioner in North Dakota, encouraged insurers to reinstate cancelled policies in November. But last week, he was far more cautious.

“Creating two tiers of plans – the compliant and noncompliant—could result in higher premiums overall and market disruptions in 2015 and beyond,” said Hamm, who is serving as president this year of the National Association of Insurance Commissioners.

Here’s why the Obama administration’s delay could cause rates to spike, at least in states like Indiana:

Enrollment in the Obamacare exchange in Indiana has already been tepid so far. Through the end of January, 48,000 Hoosiers had enrolled in an Obamacare plan on the exchanges. Nationally figures suggest one out of five of them failed to pay their first month’s premium, meaning the true number might be closer to 38,000.

There are two months of enrollment data we don’t have, so that number will grow. But keep in mind, there were 178,000 Hoosiers with individual health insurance policies before Obamacare.

The low level of enrollment could be problematic when it comes time for insurers to price their 2015 policies. As Bob Laszewski noted last week on The Health Care Blog, it usually takes 70 percent of an expected group to sign up in order to balance out the risk of the unhealthy people with the premiums of the healthy.

There are mechanisms in Obamacare to offset insurers' losses. In fact, President Obama's budget recently estimated the federal government would pay as much as $5.5 billion to insurers' to cushion their losses this year on the Obamacare exchanges.

But insurers' losses were bound to mitigated heading into 2015 because, at least in Indiana, there are a ton of small employers that will join the exchange at the end of this year.

That’s when the Obamacare SHOP exchange for small employers will get started. It’s also when the pre-Obamacare policies of many Indiana companies were set to expire, because employers renewed them for 12 months in the fall of 2013.

I reported in January that many of those employers—particularly those with fewer than 50 workers, were planning to terminate those group plans at the end of this year and instead send their employees to buy health coverage individually in the Obamacare exchanges. That's because some of them were promised premium increases at the end of this year of 50 percent or more, if they remained on the pre-Obamacare plans.

Whether they did or didn’t carry out these plans, either way, it would have been helpful for the risk pool in the Obamacare exchanges.

That’s partly a numbers thing. There are more than 900,000 Hoosiers covered by health plans sponsored by employers with fewer than 50 workers. Getting them into the risk pool would help balance out any skewing that occurred on the individual side of the Obamacare risk pools, due to the disastrous October launch of HealthCare.gov, the web site portal for shopping on the exchange.

The small business employees that are not in the exchange now are likely to be younger and healthier. That’s the reason their employers found it advantageous to remain outside the Obamacare risk pool for most of this year.

You see, Obamacare does not allow health insurers to charge their oldest customers any more than three times as much in premiums as they charge their youngest customers. Previously in Indiana, the oldest customers paid six or seven times more than the youngest.

The new rules, called community rating, mean that companies with younger-than-average workers will face a big increase in insurance rates under Obamacare's new rules. For businesses with older-than-average workers, the new rules will probably lead to lower health insurance premiums.

Those rules apply only to individual insurance customers and employers with fewer than 50 workers.

But if small employers can wait another two years before joining the Obamacare risk pool, then the healthiest employers will most likely choose to do so.

Same goes for the healthiest individuals.

Some critics of the law, I think, want to see this happen, because they think it will create a death spiral—or something close to it—that renders the exchanges a place you only end up if you have no other options.

“Once premiums rise, the demise of the exchanges becomes self winding,” wrote Dr. Scott Gottlieb, a scholar at the conservative American Enterprise Institute, in a piece on Forbes.com. “Higher premiums chase away more health[y] beneficiaries, causing premiums to rise still further. That’s the essence of an insurance death spiral. The end game is a benefit that erodes into something that closely resembles Medicaid.”

I'm not sure he's right. Conservatives have predicted numerous Obamacare death spirals, without one materializing yet. But if he's even directionally right, then President Obama could be trading a slightly better outcome in the 2014 elections for an exchange risk pool that actually works.

So it may take folks like Indiana Insurance Commissioner Stephen Robertson—who has been nothing but critical of Obamacare from the day it was passed—to say no to this proposal. That’s the best hope of actually saving Obamacare from the president’s attempt to sabotage it.

ADVERTISEMENT
  • Email updates
    Please send us email updates and special offers.
  • Great Grandfathering
    The continuation of non compliant ACA policies has been coined "Great Grandfathering" People don't understand what is going on in the exchanges. It's a complicated issue but there is a lot of premium joy happening. It all depends on income level. The forbes piece is not giving enough credit to premiums that are subsidized. 93% of the people buying on the exchange are getting subsidies. Imagine you have been paying $800 a month for a plan for you and your wife. Now you can get a plan for 0 premium. Can you say premium Joy?

Post a comment to this blog

COMMENTS POLICY
We reserve the right to remove any post that we feel is obscene, profane, vulgar, racist, sexually explicit, abusive, or hateful.
 
You are legally responsible for what you post and your anonymity is not guaranteed.
 
Posts that insult, defame, threaten, harass or abuse other readers or people mentioned in IBJ editorial content are also subject to removal. Please respect the privacy of individuals and refrain from posting personal information.
 
No solicitations, spamming or advertisements are allowed. Readers may post links to other informational websites that are relevant to the topic at hand, but please do not link to objectionable material.
 
We may remove messages that are unrelated to the topic, encourage illegal activity, use all capital letters or are unreadable.
 

Messages that are flagged by readers as objectionable will be reviewed and may or may not be removed. Please do not flag a post simply because you disagree with it.

Sponsored by
ADVERTISEMENT
  1. Here are a few candidates for this new group, "ripped from the headlines." First up, that bizzaro State Senator Brent Waltz; secondly, the unethical Todd Huston, and his contractual arrangements scheme; Finally, but not least of all, the dishonorable Eric Turner. What sayeth you Greg Zoeller?

  2. Good day. I can't hide this great testimony that take place in my life I will love everyone to know it and be partaker that is why I always place it on answer, I am Mrs,Natalie Cuttaia by name, I live in Texas, United State Of America, I want to thank (Mr.Bruce Brandon) for his kindness upon my family life. I never knew that there is still nice lender like this on internet and earth here. Just some Months Back, I was in search for a loan of $100,000,00 as I was running out of money for feeding and rent. I was scammed $6,800 Dollars and I decided not to involve my self in such business again but a Friend of my introduced me to a loan firm due to my appearance and doings. And I told him that I am not interested of any loan deal anymore but he told me that there is still a nice lender who he will recommend me to, and I made a trial and I am most grateful lucky am I today, I was given a loan amount of $100,000.00usd, by this great Company (Bruce Brandon Loan Company) managed by (Mr.Bruce Brandon) If you are in need of a genuine or legit loan or financial assistance and you can be reliable and trusted of capable of paying back at the due time of the funds I will advice you to, contact him via: ( bruce.brandon071@gmail.com ) And you will be free from scams in the internet. All thanks to Mr.Bruce Brandon You are the one who remove me and my family out of poverty. The reason why i am doing this is that, i promise Mr.Bruce Brandon that if i truly got my loan, i will advertize his company and bring customers to his company. Contact him via ( bruce.brandon071@gmail.com )for the Loan you have been looking for..

  3. Hello, We are firm Organization formed to help people in needs of helps,such as financial help. So if you are going through financial difficulty or you are in any financial mess,and you need funds to start up your own business,or you need loan to settle your debt or pay off your bills,start a nice business, or you are finding it hard to obtain capital loan from local banks,contact us today via email mrsroseberrywilkinsfunds.usa@gmail.com So do not let these opportunity pass you by because Jesus is the same yesterday, today and forever more. Please these is for serious minded and God fearing People. Your Name: Loan Amount: Loan Duration: Valid Cell Phone Number: Thanks for your understanding to your contact as we Await Regards Management Email:mrsroseberrywilkinsfunds.usa@gmail.com

  4. The question is, where could they build a new stadium? It seems in the past year, all the prime spots have been spoken for with potential projects. Maybe in the industrial wasteland area a block past Lucas Oil? I think it needs to be close to the core, if a new stadium is built.

  5. Aldi is generally a great shopping experience. Still, I'm sure YOU wouldn't want to shop there, which I consider a positive.

ADVERTISEMENT