![Here are three changes Congress should make to Obamacare: 1) no cancellations; 2) no bailouts; 3) no tax on the uninsured. [Credit: thinkquest.org]](https://i0.wp.com/www.dougsbriefcase.com/blog/wp-content/uploads/2014/01/Credit-thinkquest.org_.jpg)
Here are three changes Congress should make to Obamacare: 1) no cancellations; 2) no bailouts; 3) no tax on the uninsured. [Credit: thinkquest.org]
These changes would be politically popular, relatively modest and enjoy at least some bipartisan support. Although the prevailing political climate makes it hard for lawmakers to do anything of substance, making the health care law more friendly to consumers and less accommodating to corporate interests would appeal to voters across the spectrum.
To understand why, start with the current state of the law’s implementation. Obamacare’s first open enrollment period has passed the midway point and the results remain somewhat difficult to evaluate. On the one hand, more people are selecting plans. On the other hand, they don’t appear to be the people that the law’s architects had hoped or expected to select them.
They are, to begin with, disproportionately older. Figures released last week by HHS indicate that 1/3 of the 2.2 million people who selected plans offered through the exchanges are between the ages of 55 and 64. Only 15 percent are between the ages of 26 and 34, the group that is most likely to be uninsured and the one whose business insurers most covet.
More detailed information from other sources provides another troubling sign: it appears that most of the people who have so far selected plans already had insurance. The Wall Street Journal recently reported on a survey of over 4,500 people conducted by McKinsey & Co., which found that only 11 percent of exchange enrollees previously lacked coverage. The Journal also reports on data provided by Health Markets Inc., an insurance agency that has enrolled around 7,500 people in exchange plans. Of those, nearly 2/3 previously had coverage. They signed up for exchange plans either because the government required their insurer to cancel their policy, because their employer dropped their coverage, or because they preferred subsidized insurance sold through the exchanges to their existing policies.
Then there is Medicaid. The Administration and some state officials have suggested that those signups are going great guns, with HHS reporting nearly 4 million enrollments in October and November alone. But a closer look at those numbers by Sean Trende of Real Clear Politics shows that the figure is highly misleading. Medicaid, unlike the exchanges, has been around for 50 years. People apply for Medicaid all the time. In fact, according to the HHS report (p. 5), average enrollment in October and November actually declined in states that expanded Medicaid. The average number of monthly Medicaid applications was higher in July-September than in October-November in those expansion states. And of the 1.7 million enrollments that occurred in November, 780,000 (45 percent) were in states that did not expand Medicaid. In all, of that 4 million in Medicaid enrollments, Trende attributes about 190,000 – 380,000 to the Obamacare Medicaid expansion. While his analysis is by his own admission rough, it is clear that the 4 million figure greatly overstates new Medicaid enrollments attributable to Obamacare, prompting Politifact to give itself 3 Pinocchios for having initially accepted the figure at face value
Fewer uninsured people than expected have so far signed up for coverage through Medicaid and the exchanges. That suggests that Obamacare may fall considerably short of expectations. The numbers, of course, only constitute a snapshot. The next three months may produce very different results. It is far too early to conclude, as many of the law’s critics predict and some of its supporters worry, that the law will fail.
But what if those trends do hold up? What if Obamacare ends up largely enrolling people who already had coverage and those who previously couldn’t get it because of their medical conditions? What if millions of people just don’t want health insurance, even if the government subsidizes it?
The presumption behind Obamacare is that pretty much everyone wants health coverage. There has long been considerable evidence that they don’t. About 20 percent of workers decline employer-sponsored health benefits. It is estimated that in 2009, 4.5 million of 39 million uninsured adults (11.5 percent) were eligible for full Medicaid benefits but did not enroll. And Medicaid is free. Then there’s that healthy cohort of people aged 19–34 that insurers are trying so desperately to attract. Their youth and well-being make them a very hard sell. They are nearly twice as likely to be uninsured as the rest of the under 65 population — 27.2 percent vs. 14.4 percent — which is partly because they don’t want or need coverage. Passing a law didn’t suddenly make these people crave health insurance.
Some have argued that insurers won’t be able to turn a profit unless people who don’t want coverage buy it anyway. It’s hard to say for sure. Comments made by health insurance CEOs during the recent JP Morgan Healthcare Conference suggest that insurers really aren’t all that worried about disappointing enrollment numbers. “We believe that over time, a lot of these bumps will work themselves out,” Joe Swedish, president of Wellpoint, the country’s second-largest health plan, recently told the Washington Post. “We have always expected it to have a sort of lumpiness to it, the rollout. It’s certainly become more lumpy than one would have predicted [but] over time, this will work out.”
The Post also quotes from a note prepared by a JP Morgan health care analyst which suggests that insurance companies never expected much revenue from the products they sell through the exchanges. “Although they may garner the most headlines, we do not expect the new health benefit marketplaces to be a significant factor to 2014 earnings,” the analysis stated. “We think the downside risk of low initial enrollment for large, diversified managed care companies is limited given that this is a relatively small portion of their business.”
Do the exchanges really matter that little to insurers? The Post notes that the proportion of the population expected to enroll through the exchanges is relatively small. CBO projects that around 7 million previously uninsured people will enroll in plans sold through the exchanges this year. Compare that to the 171 million people that were covered under employer-sponsored plans in 2012. And even if young people sign up for exchanges at just half the projected rate, insurers still will turn a profit, according to a Kaiser Family Foundation study. So if the exchanges end up being a bit “lumpy” and don’t attract a lot of young people, insurers arguably can make do.
It is, of course, possible that these analysts and insurance executives are understating the risk of exchanges collapsing in a “death spiral.” Perhaps they’re simply trying to be supportive of the law and of their own stock prices. Time will tell. If insurers make a profit, Obamacare will succeed. If losses cause them to abandon the exchanges, it will fail.
Either way, the profitability of a particular industry isn’t the taxpayers’ cross to bear. All of the hand-wringing and speculation about young and healthy people signing up, as I have noted previously, is really nothing more than fretting over the profitability of insurance companies. That is not the government’s concern. Its objective is to make health insurance more widely available and affordable. Obamacare offers one way to achieve that goal. Government should not, in pursuit of this objective, pad the bottom line of insurance companies.
Obamacare should advance the interests of consumers, not corporations. Unfortunately, that is not always the case. The law includes provisions that harm consumers in the interest of boosting corporate profits. It is laden with billions in corporate welfare payments to insurance companies. Subsidies are supposed to be for people who buy insurance, but Obamacare includes plenty of handouts to corporations that sell it.
James Capretta and Yuval Levin recently advocated in the pages of the Weekly Standard for changes to the law that I have previously endorsed. These changes can easily be summarized: no cancellations, no bailouts, no tax on the uninsured.
- No cancellations. Prior to Obamacare, insurers were required to renew policies that they sold to individuals and small businesses. Obamacare turned this consumer protection on its head, making it illegal for insurers to renew such coverage. The idea was to force as many people as possible out of the coverage they liked and into the exchanges, benefiting corporations that sold products there. Millions had their coverage cancelled. But other individuals and businesses avoided losing their coverage by renewing it before the new requirements kicked in this past January 1. Those policies will expire later this year. Congress should prevent future cancellations by reinstating the pre-Obamacare consumer protection that guarantees the renewability of existing individual and small group coverage.
- No bailouts. There are two hidden provisions in Obamacare that provide direct corporate welfare to insurers that sell through the exchanges. The first is the $10 billion that government is collecting from employer and union-sponsored plans and giving to insurers who sell through the exchanges. [NOTE: Capretta and Levin did not specifically cite this provision in their Weekly Standard piece.] The second is a “risk corridor” program under which the government will potentially transfer billions in taxpayer money to insurers that sell through the exchanges to limit their losses. Both provisions are sheer corporate welfare. Both should be repealed.
- No tax on the uninsured. Perhaps the least popular provision of the law is its imposition of a tax penalty on people who don’t buy health insurance. The IRS should not penalize people who don’t want coverage. Congress should repeal the tax on the uninsured.
These changes would make Obamacare more of what Americans say they want and what many thought they were getting. If Congress were to enact them, Obamacare would become a program under which people could keep the coverage they like and buy the coverage they need regardless of their medical condition. Government would no longer penalize people who don’t want insurance. And insurance companies could no longer count on billions in handouts from taxpayers.
For Democrats who are running on the proposition that they want to fix Obamacare, these provisions represent an opportunity to show they mean it. For Republicans who hope to repeal Obamacare in 2017, this is a chance to give consumers and taxpayers some relief in the meantime.
The President probably wouldn’t like this bill. Congressional leaders of both parties also might object – Democratic leaders because they regard the law as untouchable, Republican leaders because they don’t want to give Democrats the opportunity to cast politically popular votes to amend it. But with sufficient support from Members in both parties, that could change. Harry Reid has turned the Senate into a legislative boneyard, but even he might have trouble withstanding pressure from within his own caucus to act, particularly in an election year.
A bipartisan effort to change Obamacare is indeed a crazy idea. It is also one that voters would embrace.
repeal!!!!!!!!!!!!!!
It’s a bad law that should never have been passed and deserves repeal. Repeal, however, is not feasible until we get a new President and a Congress under GOP control. That is 3 years away. In the meantime, the government is getting ready to cancel coverage of millions more people (the debacle of last fall was just the first wave of cancellations), tax people for not buying coverage, and shovel untold billions in taxpayer money to insurance companies that have agreed to help implement Obamacare. Congress can stand by and watch all of this happen, waiting until 2017 when repeal might be feasible; or it can act to stop the law’s worst abuses now. I’m for doing what’s possible now.