Politics

'World War III' Between Obama and the Insurance Industry

The brief, bizarre and tentative friendship between the Obama administration and the healthcare insurance industry is so over, thanks to the president's plan to allow insurers to keep offer plans they've already cancelled.

Arit John

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The brief, bizarre and tentative friendship between President Obama and the health insurance industry is so over, thanks to the president's plan to allow insurers to keep offering plans they've already cancelled. As one anonymous source put it:

On Thursday morning Obama announced that he would allow a one-year grace period for insurers to offer Americans to keep their non-Obamacare-compliant plans through 2014. So if insurers won't, or can't, keep those plans on the market, then it's not the president's fault. 

(Update: And now some state regulators are siding with the insurance industry. The National Association of Insurance Commissioners, which is made up of the chief insurance regulators from all 50 states and the District of Columbia, also issued a statement written by its president, Louisiana's Republican insurance regulator Jim Donelon, who argued that "this decision continues different rules for different policies and threatens to undermine the new market." The president's plan gives state regulators the power to approve or deny the extension of plans in their state, making them susceptible to blame as well.)

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As BuzzFeed's Evan McMorris-Santoro reported today, the insurance industry is not impressed with Obama's new plan. "This doesn’t change anything other than force insurers to be the political flack jackets for the administration," an industry insider told BuzzFeed. "So now when we don’t offer these policies the White House can say it’s the insurers doing this and not being flexible."  America's Health Insurance Plans president and CEO Karen Ignagni, has also released a(n overly dramatic) statement about how the president's plan would destabilize the industry. "Changing the rules after health plans have already met the requirements of the law could destabilize the market and result in higher premiums for consumers," she wrote. 

Of course, that destabilization depends on whether insurers go through with keeping cancelled plans. The insurance industry is definitely guilty of recommending overly expensive plans and misleading consumers, adding to the rate shocks some have experienced, but they've also built their rates for 2014 on the assumption that young and healthy people would be joining the Obamacare exchanges, not keeping their old plans, CNBC noted. One insurance source (the friendship is over, but no one wants to go on the record) told CNBC that this plans is "a joke" and doesn't change anything, since insurers and regulators had some discretion with canceling plans. 

It's a little bit silly to assume that the insurance industry can undo three years of preparation for the Affordable Care Act in a few months. Un-cancelling plans and informing consumers will take time. That doesn't even factor in companies like UnitedHealthcare and Aetna, which announced that they were leaving the individual insurance market in California. As we mentioned yesterday, extending deadlines doesn't change reality. 

This article is from the archive of our partner The Wire.