Obamacare Initiates Self-Destruction Sequence

Obamacare Initiates Self-Destruction Sequence

By Megan McArdle - Dec 20, 2013

On Wednesday, Politico’s Carrie Budoff Brown reported that the administration was saying fewer than 500,000 people had actually lost insurance due to Obamacare-induced cancellations. This struck me as a strange leak: Half a million is a lot less than many people (including me) have been estimating, but it is still not a small number, and the administration has tended to sit on negative information until the last possible moment.

Yesterday, we had a more official announcement from the administration: Anyone who has had their policies cancelled will be exempt from the individual mandate next year. The administration is also allowing those people to buy catastrophic plans, even if they’re over 30.

What to make of these two statements? On the one hand, the administration is trying to minimize the number of people who have been
affected by cancellations, and on the other hand, it is unveiling a fix to the problem of cancellations. And these are not minor changes.

As Seth Chandler points out, Healthcare.gov doesn’t even let you see catastrophic plans if you’re more than 30 years old. Is now the time to be making technical changes to the website?

As Avik Roy points out, catastrophic plans aren’t that much cheaper than the so-called bronze plans. They’re also not eligible for subsidies. This is unlikely to be much help to folks who lost insurance; all it does is introduce some much-unneeded complexity to Healthcare.gov.

As Aaron Carroll points out, insurers calculated their premiums for this year on the expectation that the relatively healthy folks who were already buying insurance would be buying policies on the exchange. The insurers are not happy about this latest change, and Carroll predicts that they will ask the administration to push more money to them through the “risk corridors.” I think he’s right.

As Ezra Klein points out, this seriously undermines the political viability of the individual mandate: “But this puts the administration on some very difficult-to-defend ground. Normally, the individual mandate applies to anyone who can purchase qualifying insurance for less than 8 percent of their income. Either that threshold is right or it's wrong. But it's hard to argue that it's right for the currently uninsured but wrong for people whose plans were canceled … Put more simply, Republicans will immediately begin calling for the uninsured to get this same exemption. What will the Obama administration say in response? Why are people whose plans were canceled more deserving of help than people who couldn't afford a plan in the first place?”

Arnold Kling put it more pithily: “Obama Repeals Obamacare.”

I’d ask this: What do you do for an encore? Will the administration force these folks to buy insurance next year? Or will they keep allowing special exceptions rather than take the political heat for changing health insurance that people liked?

I’m not sure the administration is thinking that far ahead. The White House is focused on winning the news cycle, day by day, not the kind of detached technocratic policymaking that they, and the law’s other supporters, hoped this law would embody. Does your fix create problems later, cause costs to spiral or people to drop out of the insurance market, or lead to political pressure to expand the fixes in ways that critically undermine the law? Well, that’s preferable to sudden death right now.

However incoherent these fixes may seem, they send two messages, loud and clear. The first is that although liberal pundits may think that the law is a done deal, impossible to repeal, the administration does not believe that. The willingness to take large risks with the program’s stability indicates that the administration thinks it has a huge amount to lose -- that the White House is in a battle for the program’s very existence, not a few marginal House and Senate seats.

And the second is that enrollment probably isn’t what the administration was hoping. I don’t know that we’ll start Jan. 1 with fewer people insured than we had a year ago, but this certainly shouldn’t make us optimistic. It’s not like people who lost their insurance due to Obamacare, and now can’t afford to replace their policy, are going to be happy that they’re exempted from the mandate; they’re still going to be pretty mad. This is at best, damage control. Which suggests that the administration is expecting a fair amount of damage.

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