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Sunday, November 17, 2013

Professors Chirba and Noble - President Obama’s “Fix” for the Cancellation Debacle: A Simple Waiver May Not Be So Simple

Guest Bloggers Mary Ann Chirba and Alice A. Noble make a timely return to HealthLawProf with the following post: 

President Obama’s past assurance to the American public that people could keep their plans if they so desired, and the inaccuracy of that statement has generated the current outcry for the President to do better on his past apologies and to “do something” about the looming individual mandate and the loss of plans people would prefer to keep.

In his announcement on November 14, 2013 the President attempted to do better on past apologies and do something about the rollout fiasco. Contrary to a deluge of early media reports that he has delayed the individual mandate for a full year, the details of his statement reveal a more incremental approach: effectively granting a waiver to certain people in the individual market.

This is not the first time a waiver has been granted for individual policies.  Secretary Sebelius granted certain plans, even those with woefully inadequate limits on annual coverage (known as “mini-med” plans) a waiver from the ACA’s new restrictions on annual limits. This waiver permitted these limited benefit plans to be sold up until January 1, 2014, allowing individuals to retain coverage until more affordable and comprehensive policies became available with the rollout of the exchanges.  It is possible that some of these “mini-med” plans will continue to be sold as part of the new waiver applicable to cancelled policies.

Despite news reports to the contrary, this latest waiver does not extend beyond those individuals who have received cancellation notices.  The individual mandate in all other ways remains---all individuals must obtain coverage or be penalized for failing to do so.  That obligation is just as in tact now as it was before this latest announcement.  We consider what this new waiver does, does not do, and the potential ramifications of both. First:

What did NOT happen?

President Obama did not delay the application of the individual mandate.

The President did not offer a broad permission to purchase noncomplying policies--He spoke only of those individuals whose policies have been cancelled and who still wish to purchase that cancelled policy.  

What did happen?

President offered a "waiver" of sorts for those individuals who have gotten cancellation notices from their insurers. Individuals who have received cancellation notices may purchase these policies for 2014 without running afoul of the Affordable Care Act individual mandate requirement.  

But even with this "waiver" the President acknowledged that it is up to the insurance company to offer the coverage again and the pricing of that policy will be up to the insurance company.  

In addition, the policy cannot be sold in a state without state regulatory approval.  The President (again as he acknowledged) has no control over that process.  

The President stated two requirements for those insurers who sell such formerly cancelled policies----

1. The policy must contain a notice of the ACA protections that are not included; and

2. The policy must state that the Marketplace offers new options that may be cheaper.

Thus, at the end of the day, individuals whose insurer is willing to sell them the policy that had been cancelled and who live in a state that permits that policy to be sold, may purchase that policy and satisfy their requirement to purchase health insurance even if that policy is not in full compliance with the new ACA requirements.

Potential Impact of the Waiver Announcement:

1. Affected Individuals: The disastrous rollout itself affects only a small segment of the market: the so-called individual market available to individuals or families who do not have coverage through an employer-sponsored plan or a publicly funded program.

President Obama’s announcement therefore has no direct impact on participants with other forms of insurance.

2. The Individual Insurance Market: The impact on the individual health insurance market and pricing on the exchanges is unclear. Prices are set for 2014.  However, if the costs exceed expectations for 2014, we could see higher prices in 2015.  

The President noted that the old individual market was not a reliable market, that there was considerable "churn" in that market.  The new exchange Marketplace is expected to be stable, fair, and provide greater consumer protection than the pre-health reform individual market.

Nevertheless, if a significant number of individuals who have received cancellation notices end up purchasing back their cancelled policies rather than going to the exchange to purchase health care, there may be some impact on the balancing of risk pools.  Assuming that those who have health insurance in the individual market and are satisfied with the price of their coverage to the point that they are willing to purchase it again, they are likely to be healthy.  As a result, individuals who have greater health care needs---those individuals who have been unable to purchase insurance or unable to find affordable coverage--- will constitute a higher proportion of individuals seeking insurance on the Exchanges.  To some extent, this will be balanced by healthy individuals who do not have the option to purchase cancelled policies. 

In a November 14 letter to State Insurance Commissioners announcing the waiver, the Administration expressed confidence that the ACA’s risk corridor program will limit the impact that changes in premiums may have on insurers, and also noted that modifications to the risk corridor final rule will be explored as a further means to buffer the impact of the waiver on insurers.

It remains to be seen how many state insurance commissioners will sign-onto the President’s transitional one-year fix. The states of Washington and Oregon did not hesitate in expressing strong concerns about implementing this change given all that they had already put in place to meet the initial January 1 individual coverage requirement.

3. Public Support: Adjusting the individual mandate during the coming transitional year does answer the public outcry to do something. But this answer – like so many regarding a statute as broad and hyper-complicated as the ACA – this answer raises a host of questions and will undoubtedly fuel the next wave of public confusion. Fixing may will be and even bigger challenge than untangling the rollout dilemma.

Political fallout and dwindling public support certainly inspired the President’s effort to do something.  Whether this particular measure will achieve its intended effect of quelling criticism, however, is anything but clear. Resistance by state regulators and insurers may render the President’s plan mere wishful thinking.  His announcement of the latest waiver was obviously intended to assuage rollout confusion. In the near term, however, it is might just achieve the opposite result.

The unfolding problems of the rollout and the evolving response of the Administration have given Congressional opponents more to work with in their efforts to degrade and defeat the ACA as a whole. It has also encouraged former ACA-supporters to join their cause.  Therefore, rather than initiating a cooling off period, the President’s announcement inspired the House Republicans to turn up the heat by passing the “Keep Your Health Plan” bill (H.3530) within one day, and attracting 39 Democrats to support it.

The President’s clearest message may be one he never intended to make:

In announcing his plan, President Obama acknowledged that he had “fumbled the ball” with the Healthcare.gov rollout. Unable to undo the past few weeks, he emphasized that for the “next play,” he would do his best to “do right by the team.”

As explained, the President’s plan is more moderate than an outright one-year delay of the general obligation to purchase a specific level of coverage. More moderate, however, does not mean it is easier to explain.  While his plan will bring relief to many, it has nevertheless generated even more confusion. Confusion inevitably depletes public support and the President has none to spare these days.  

But much of the public’s confusion could have been prevented or at least mitigated had the Administration undertaken an early, aggressive and sustained campaign to educate the American public about the ACA. A statute as comprehensive and complex as this one needed more than a few bullet points and sound-bites.  

In this regard, the President pointed out that the ACA has already yielded many benefits for many people – and it certainly has – and he is justifiably frustrated that these successes have been under-reported by the media – because they have been underreported.  The President implied that there would be greater support for the ACA had the media taken a more balanced approach by reporting both the hits and misses of the Act

The President is correct in acknowledging that public support for the ACA is predicated on understanding it. However, he is not correct to chide the media for failing to pull its weight in educating the public. The public’s understanding of, and support for the ACA should not depend on the media picking up a talking point and running with it. Stated simply, it is not the media’s job to do what the Administration should have done: take the lead in informing the public about a major change in social policy that had taken decades to achieve: national health reform.

President Obama is right: he did fumble the ball, but this was not the first time.  Since 2010, the Administration has behaved as if, having seen the ACA through enactment, the game was over with a win in the President’s column.  The real fumble was in thinking his Administration had won the game when, in reality, it had only survived the second quarter.

Mary Ann Chirba and Alice A. Noble

[KVT]

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