The Woes of Obamacare

By: Maya Kushner

The Patient Protection and Affordable Care Act (PPACA), more commonly known as Obamacare, has been fraught with problems from the day of the rollout. In June of this year, President Obama announced that the so-called Employer Mandate portion of the PPACA will not be enforced until 2015, rather than its planed effective date of January 1, 2014. The decision was made after a barrage of complaints from multiple employers and lobbying groups, claiming that implementing all of the new requirements in such a short amount of time was not feasible.

Now individual consumers are having issues with Obamacare as well. The PPACA website that consumers have to use to purchase their new plans seldom works, while the consumers’ current plans are being cancelled despite President Obama’s assurances that the new law would not impact existing insurance plans.

The October 1st rollout of HealthCare.gov, the “healthcare marketplace” through which consumers are to purchase healthcare plans, was a disaster. The website experienced many problems, such as long sign-in wait times, log-in difficulties, slow page loads, insurance account creation problems, inadequate server capacity, and service outages, just to name a few. This left the majority of willing individuals unable to purchase insurance, and after a month of the site being available, only 26,000 people have successfully used it to sign up for insurance plans, compared with the 500,000 the White House projected. And the problem hasn’t been fixed yet. Even now, HealthCare.gov features a prominent banner that reads “The Health Insurance Marketplace online application isn’t available from approximately 1 am to 5 am EST daily while we make improvements. Additional down times may be possible…”

It is quite surprising that the rollout of the website went as poorly as it did, considering that President Obama considers the PPACA as one of the crowning achievements of his presidency, and that he had three years and all the programmers he wanted at his disposal to get it right. More than a few eyebrows were further raised on November 19, when the House Energy and Commerce Committee released documents stating that the Obama administration was warned as early as March about the potential problems with HealthCare.gov. That same day the White House Press Secretary Jay Carney confirmed President Obama was briefed on these warnings at the time.

While most consumers are unable to purchase health insurance plans due to the faulty website, their current plans are being cancelled by the companies, despite President Obama’s oft-repeated promise that “if you like the plan you have, you can keep it.” The problem with this promise is that it only addresses half of the equation – the consumers. However, a health insurance plan is a contract between a consumer and an insurance company, and either party may choose to withdraw (subject to specific provisions, of course).

The PPACA includes a “grandfather” clause (Sec. 1521 of PPACA or 42 U.S.C 18011), which states, it part, that “[n]othing in this Act (or an amendment made by this Act) shall be construed to require that an individual terminate coverage under a group health plan or health insurance coverage in which such individual was enrolled on the date of enactment of this Act.” But nowhere in the PPACA does it state that the insurance companies must maintain current plans, or offer re-enrollment in such plans when they expire. Additionally, the same PPACA clause mandates that all plans, even those that are grandfathered in, conform to certain new requirements. For example, these requirements include extending coverage to adult children up to 26 years of age and ending lifetime limits on coverage.

Thus with the enactment of PPACA, insurance companies are now facing an uneasy task of creating new plans by January 1, 2014 that conform to the new law. Conforming means abiding by such new mandates that include abolishing lifetime limits on coverage, abolishing the pre-existing condition bar for children, and providing free preventative care, all while keeping their premiums affordable. The companies also have the option of continuing to offer plans that have been grandfathered in while simultaneously offering the new, PPACA-compliant plans. However, offering grandfathered plans is not an economically sound decision. First, insurance companies would have to offer additional mandated benefits that were not envisioned in the original cost structure of the plan. Second, the pool of individuals using these plans would dwindle very quickly. This is because few individuals re-enroll in the same plan year after year. In fact, a study published in the Health Affairs Journal shows that only “17 percent of those with individual insurance coverage retained it for more than two years.” At the same time, enrolling new individuals in these grandfathered plans is prohibited – thus companies would end up supporting plans used by just a handful of individuals, which is not a cost-effective strategy. So, as an individual, you may “like the plan that you have,” but for an insurance company, it’s just not a sound business decision to keep it around, and so many of the current plans that do not comply with the PPACA have been cancelled.

The cancellation of current plans created a national uproar. The public displeasure was so widely and loudly voiced, that even former President Bill Clinton called upon President Obama to rectify the situation and keep his promise, even if it meant changing the law. But President Obama is sticking to his guns and it does not seem likely that PPACA will change any time soon. However, he did offer some temporary fixes in a November 14th press conference. President Obama said that individuals will be able to keep their plans if (1) the plans were purchased prior to PPACA going into effect (which is just a reiteration of the grandfather clause), (2) plans that were purchased prior to PPACA going into effect but have changed since (and hence maybe be considered “new plans” and not fit into the grandfather clause), and (3) plans that were purchased after the law went into effect, but prior to 2014.

The temporary fix has been widely criticized in the health insurance industry. The American Health Insurance Plans, the lobbying arm of the industry, has stated that “[p]remiums have already been set for next year based on an assumption when consumers will be transitioning to the new marketplace,” and further warned that “changing the rules after health plans have already met the requirement of the law could destabilize the market and result in higher premiums for consumers.” The National Association of Insurance Commissioners stated that in addition to problems this fix may create, “it is [also] unclear how, as a practical matter, the changes proposed today by the President can be put into effect,” since the policy cancellation notices already went out in most states.

It is too soon to tell whether this temporary fix will actually work, but it’s doubtful. Once again, it only addresses the options of the consumers, while keeping the options of the insurance companies the same. And the companies, it seems, have made up their minds.

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