President Obama has a new offer to let people keep their health care plans. But for Obamacare to work well, it might be best if no one takes him up on it.
There's no question Obama and congressional Democrats were taking on water over the wave of cancellation notices hitting consumers with individual insurance policies. Democrats felt that they were on the hook for Obama's "If you like your plan, you can keep it" pledge, even though Obama himself has backed away from it.
Obama sought to tamp down the controversy with a proposal that will let insurance companies un-cancel their canceled plans and continue to offer them for another year. It's a policy answer to a mostly political problem.
The sharpest divide in reaction to Obama's announcement Thursday was not between Republicans and Democrats. It was between people focused on winning a tough election and people focused on the nitty-gritty mechanics of the Affordable Care Act's reforms.
Nothing put a finer point on that division than the reaction from state insurance regulators. The insurance department in solid-blue Washington state said it wouldn't go along with Obama's offer. Insurers there will not be allowed to un-cancel their plans.
"I do not believe his proposal is a good deal for the state of Washington," state Insurance Commissioner Mike Kreidler said in a statement.
The National Association of Insurance Commissioners, which has helped implement several key pieces of the Affordable Care Act, including its new insurance regulations and marketplaces, also said it was "concerned" by Obama's proposal.
"This decision continues different rules for different policies and threatens to undermine the new market, and may lead to higher premiums and market disruptions in 2014 and beyond," the NAIC said in a statement.
Obama's announcement appears to have made some difference among skittish Democrats. The tone on Capitol Hill was noticeably friendlier on Thursday than it had been on Wednesday.
"I think it's moving in the right direction.... I didn't think the target was, basically, people that had insurance. It was to target the people who were uninsured. So, I think they acknowledged that," Sen. Joe Manchin, D-W.Va., said as he left a closed-door meeting with White House officials.
But there is a risk that this plan to alleviate political pressure — if it works — could have negative implications for the policy framework of Obamacare.
The Affordable Care Act did not cause insurance cancellations by accident. It set new standards for insurance plans and tried to move people into policies that met those standards. A complicated, interconnected tangle of policies all serve the same goal: Building a functional marketplace for individual coverage, where sick people and healthy people are pooled together.
Obama's latest proposal, though, would let some healthy people stay out of the risk pool for another year. That certainly would help healthy and reasonably wealthy individuals pay a lower premium — because it's an extension of the uneven marketplace Obamacare was intended to correct.
It won't allow people to purchase new policies that don't comply with the law, only to keep existing ones. And insurance companies have already adjusted their business models to sell compliant plans, so they might not even be interested in reviving policies they have already canceled, just for a year. Those factors could blunt any negative effects of Obama's announcement and mitigate the damage to the law's exchanges.
But if people take advantage of Obama's plan, it could threaten the underlying structure of Obamacare and cause premium hikes next year, the American Academy of Actuaries said.
"Changing the ACA provisions could alter the dynamics of the insurance market, creating two parallel markets operating under different rules, thereby threatening the viability of insurance markets operating under the new rules," said Cori Uccello, the Academy's senior health fellow.
That's largely why insurance companies were so angry over the proposal. They opposed the Affordable Care Act, but have complied with its requirements and adapted their business models to the law's new insurance exchanges. Insurers have created new plans that cover essential health benefits, are available to people with preexisting conditions, and so on.
They're counting on the same underlying dynamics as the White House. And now the White House is chipping away at those dynamics.
"Premiums have already been set for next year based on an assumption of when consumers will be transitioning to the new marketplace," America's Health Insurance Plans said in a statement. "If now fewer younger and healthier people choose to purchase coverage in the exchange, premiums will increase and there will be fewer choices for consumers."
In short, Democrats are happy to have something to point to as a solution. But state regulators and insurers don't want to see that solution make it very far in the real world.
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