Like Joe Manchin, she hails from a red state. Which is why, like Joe Manchin, she’s not waiting to see how the “tech surge” turns out before making her way towards the lifeboats. And yet, as has been said ad nauseam the past two days, delaying any one part of the law not only won’t help solve its problems, it could make them drastically worse. I go back and forth between thinking that Democrats like Hagan understand that, and are simply grasping at straws like delaying the mandate or extending the enrollment period because they’re panicked and it gives them a chance to stall, and thinking that maybe they don’t understand that and they’re prepared to steer this ship unwittingly into an even bigger iceberg. ObamaCare is like a game of Jenga that’s 40 stories high, and now the red-state Democrats who built it have decided to impress their constituents by pulling big pieces from the bottom. Note to self: Take cover.
[T]he Affordable Care Act’s insurance market reforms have created a system prone to what Charles Perrow dubbed “Normal Accidents.” By “normal,” he didn’t mean “minor” — the lead exhibit was Three Mile Island. Rather, he meant something like “hard to avoid.” The system is both complex and tightly coupled: All the pieces are interdependent, so a failure in one part is apt to cascade throughout the market. This is not a system where you want to start pulling out one piece to see how well the rest can get along without it.
The administration clearly understood this — right up to the point where a major component failed. Now it’s apparently planning to keep the reactor running with as many pieces as possible in the hopes that none of it will unexpectedly blow up. This is not sound policy thinking, or even sound political thinking, and I think that all of us who care about keeping insurance available for ordinary Americans should try to talk them out of it — for their good, as well as our own.
See yesterday’s post if you’re unclear on why delaying the enrollment period is apt to push us further towards an industry death spiral. But wait — what about those “risk corridor” provisions that are built into the law to prevent insurers from suffering a death spiral caused by too many sick people coming onto the rolls without enough healthies? Won’t they limit the damage? Not really, says Peter Suderman, because those corridors aren’t designed for an industry-wide failure:
Now, it’s true, as The Incidental Economist’s Adrianna McIntrye points out, that there are risk adjustment mechanisms built into the law designed to protect insurers who end up with too many sick individuals. But as a Health Affairs brief on the law’s risk adjustment provisions makes clear, those provisions are designed to make sure that no one plan gets stuck with too many sick individuals. Plans with fewer sick people pay into a fund that creates a backstop for plans with a greater than expected share of sick policyholders. That helps mitigate individual plan risk. But it doesn’t really solve the problem if the entire pool, across most all of the insurance plans, is smaller and sicker than expected. A death spiral that shifts some premium income around is still a death spiral.
The larger worry is that we may be on track for an insurance market meltdown no matter what happens with the individual mandate.
If only Lehman Brothers had melted down five years ago, maybe you could have gotten the rest of the financial industry to absorb their losses. But when everyone’s melting down, who bears the cost? If you’re familiar with TARP, you know the answer.
Here’s video of Hagan, who said this afternoon that she’d like to see the enrollment period extended by two months, specifically. Is there any policy reason for that, or did she just pick a number that sounds kinda sorta reasonable? By the way, while we’re absorbed with the daily minutiae of Healthcare.gov’s collapse, thousands upon thousands of people are being dumped from their current insurance and onto the malfunctioning ObamaCare exchanges thanks to the law’s rules about non-grandfathered plans. Just today, per Philip Klein, the CareFirst provider in Maryland, Virginia, and D.C. confirmed that they had to drop 76,000 customers because their current plans don’t fit O-Care’s specifications. All of those people are now dependent upon the 40-story Jenga tower remaining upright, as are millions upon millions of others who’ve already been dropped or soon will be. How lucky do you feel?