Other states have rejected it too, of course, but California is different for two reasons. One: The exchange there actually requires participating insurers by contract to cancel their old plans by the end of this year. That’s why it fell to the board of the exchange itself rather than California’s insurance commissioner (who supports O’s “fix”) to decide what to do. Only they can cancel the contracts. Two: California’s had more plan cancellations — and enrollments on the exchange — than any other state. Through sheer volume alone, their decision is the most significant of America’s 50 insurance regimes.
TPM calls this a “major blow to President Obama’s plan.” Is it?
The Covered California Board of Directors unanimously decided to stick with its current approach of phasing out the non-compliant policies by year’s end, saying Obama’s request that insurers let Americans keep those plans through 2014 will not help consumers in the end.
“The board cited that extending the deadline offers no benefit to the consumer and may create confusion about accessing affordable health care coverage through Covered California,” it said in a press release…
“There’s no way to make the federal law work without this transition to ACA-compliant plans,” board member Susan Kennedy said. “Delaying the transition isn’t going to help anyone; it just delays the problems. I actually think that it’s going to make a bad situation worse if we complicate it further.”
She’s right, of course. Obama’s “fix” is a political fix insofar as it tries to undo his Big Lie about people being able to keep their plans. It’s not a policy fix. On the contrary, because it would let canceled consumers revert to cheaper coverage, it would deprive insurers of the new revenue they’re counting on as people start moving onto the exchanges. That would raise the odds of adverse selection in the exchange risk pools, which means higher premiums and/or some sort of HHS bailout potentially, all of which is a disaster for O and the law. That’s already a concern for California. They’re crowing lately about the fact that enrollment has picked up dramatically over the last few weeks, but the proportion of young enrollees needed to keep the exchange in the black is smaller right now than it needs to be by the end of enrollment. That could be a temporary blip, with the number of “young invincibles” to skyrocket as the enrollment period drags on and awareness of the mandate spreads among young adults. But obviously, if there’s already a potential adverse selection problem looming, the exchange board doesn’t want to do something that might make it worse.
In fact, dig down into the numbers that California’s released about its new exchanges enrollees and you’ll find that the heavy majority of them earn too much to qualify for subsidies. That suggests that most of them are people who used to have coverage and then were forced to buy an O-Care plan when that coverage was dropped. Give them the option now of un-canceling their old plan and not only will you lose some revenue, you’ll spoil a rare instance of O-Care working exactly as it’s intended. All of which is why, I think, Obama secretly wants state commissioners (and the California exchange) to reject his “fix.” It’s better for the law if they do and it sets them up to be the bad guy when disgruntled consumers ask why they can’t have their old coverage back. That’s what the fix was really about, of course — shifting blame. The fact that the state’s insurance commissioner sided with O knowing/expecting/quietly hoping that the exchange board would reject O’s fix suggests that he’s not above passing the buck either when there’s an easy way to do so.
If all of that wasn’t enough, there is, of course, the prospect of legal chaos for any insurer that resurrects an un-canceled plan:
But the standards plans have to meet are written into the law. So, the administration might not do anything about plans that don’t meet the law’s requirements, but a consumer could still sue his or her insurance company for selling a product that doesn’t cover services it is legally required to cover.
“The fact that the law still says what it says has implications beyond the federal government’s willingness to enforce it,” [law prof Jonathan] Adler said…
“I know enough to be able to say with some confidence that the insurers have reason to be worried,” [law prof Nicholas] Bagley said…
“An insurer who continues to provide a policy that does not comply with the ACA’s requirements, and denies payment for an ACA-covered procedure in keeping with the policy, could be sued by the enrollee,” said Chris Holt and Laura Collins, policy analysts at the conservative American Action Forum.
Exit question for legal eagles: Wouldn’t the result of a lawsuit like the one described above be to find the un-canceled plan illegal, not compel payment in accordance with the ACA? I thought the O-Care statute says that plans that don’t include all of the “essential benefits” can’t be offered. If an insurer offers one anyway and it ends up in front of the judge, wouldn’t the ruling be that the plan is unenforceable? That would still mean chaos for both parties — the consumer wouldn’t be covered and the insurer would, presumably, owe him a refund on his premiums — but it matters insofar as it would give the consumer an incentive not to file suit in the first place.