Obamacare Needs a Solution Beyond “Sorry”

The White House is increasing its reliance on insurers by accepting their technical help in efforts to repair the problem-ridden online health insurance marketplace and prioritizing consumers’ ability to buy plans directly from the carriers.

The Obama administration’s broader cooperation with insurers is a tacit acknowledgment that the federal insurance exchange – fraught with software and hardware flaws that have frustrated many Americans trying to buy coverage – might not be working smoothly by the target date of Nov. 30, according to several health experts familiar with the administration’s thinking.

White House officials reject the idea that the strategy represents a contingency plan in the event that the online system continues to falter.

“We are working 24-7 to ensure that the site is working smoothly for the vast majority of users by the end of November,” said Chris Jennings, deputy assistant to the president for health policy. He said the administration remains confident that the site, HealthCare.gov, will be ready by the end of the month and that the White House always envisioned insurers’ direct enrollment of customers would be important to the law’s success.

The government has said for months that consumers would be able to go directly to insurance companies to buy the health plans offered on the exchange. But this was always imagined as a secondary route, along with call centers and in-person enrollment assistants.

If insurers’ sites became a main way to buy coverage, it would undermine the side-by-side comparison shopping – as is used on travel Web sites such Kayak – that HealthCare.gov is meant to promote. That’s because individual insurers are not obligated to tell their customers about competing health plans available. They are required only to advise consumers that other plans exist and can be found on HealthCare.gov.

Insurers are eager to take on a larger role. But they, like consumers, have been stymied by the online system’s technical problems. During one step in enrolling customers – determining whether their income qualifies them for government help with paying for health plans – insurers must connect to part of the federal online system, and that part does not work. White House officials and insurance industry leaders have been talking about how to solve this problem, perhaps on a temporary basis, and insurers are insisting that they be allowed to keep any extra subsidy money they might accidentally be paid, said people familiar with these discussions who, like others interviewed, spoke on the condition of anonymity because of the topic’s sensitive nature.

White House deputy spokesman Josh Earnest said Friday that the president has asked his team to look at administrative fixes to help people whose plans are being canceled as a result of new federal coverage rules. Obama, in an NBC interview Thursday, said “I am sorry” to people who are losing coverage and had relied on his assurances that if they liked their plan, they could keep it.

The focus appears to be on easing the impact for a specific group: people whose policies have been canceled and who don’t qualify for tax credits to offset higher premiums. The administration has not settled on a particular fix and it’s possible the final decision would apply to a broader group.

Still, a president can’t just pick up the phone and order the Treasury to cut checks for people suffering from insurance premium sticker shock. Spending would have to be authorized by law.

Another obstacle: Most of the discontinued policies appear to have been issued after the law was enacted, according to insurers and independent experts. Legally, that means they would have never been eligible for cancellation protections offered by the statute. Its grandfather clause applies only to policies that were in effect when the law passed in 2010.

More than five weeks after open-enrollment season started for uninsured Americans, Obama’s signature domestic policy achievement is still struggling. Persistent website problems appear to have kept most interested customers from signing up. Repairs are underway. Friday the administration said the website’s income verification component will be offline for maintenance until Tuesday morning. An enrollment report expected next week is likely to reflect only paltry sign-ups.

Website woes have been eclipsed by the uproar over cancellation notices sent to millions of people who have individual plans that don’t measure up to the benefits package and level of financial protection required by the law.

“It was clear from the beginning that there were going to be some winners and losers,” said Timothy Jost, a law professor at Washington and Lee University in Virginia, who supports the health overhaul. “But the losers are calling reporters, and the winners can’t get on the website.”

When people see the costs of the new replacement Obamacare insurance, healthy and low cost customers are going to react the same way that George Schwab of North Carolina did when interviewed by NBC News. He liked his insurance plan from Blue Cross Blue Shield, which insured him and his wife for $228 a month. But his plan was recently cancelled (Obama did not like it). The insurance company offered him a “comparable” plan costing $1,208 a month, with an annual deductible soaring to $5,500 a year. The best alternative he could find on the Exchange charged a deductible of $948 a month, more than four times what his previous plan cost. He told NBC, “I’m sitting here looking at this, thinking we ought to just pay the fine and just get insurance when we’re sick.”

You can bet, though, that everyone who is sick with costly illnesses like cancer, heart disease, or diabetes will pay to get the insurance. Just like everyone whose house catches fire would analogously sign up immediately for fire insurance.

This problem is made even worse by the difficulties of working with the online Exchanges. Those who are healthy and low cost and just checking out prices will be quickly discouraged by the dysfunctional Obamacare website. But those who are sick with costly illnesses will persevere (as if their lives depended on it, which they may) until they succeed in getting coverage.

Moreover, as John Goodman, president of the National Center for Policy Analysis, points out in his highly insightful health policy blog, waves of the sickest and most costly are now swamping the insurance offered on the Exchanges. That is because state and federal High Risk Pools formerly serving these sickest and most costly are officially closing now, expecting Obamacare to pick them up. Moreover, government and private employers are in the process of dumping retirees they formerly covered on the Obamacare Exchanges as well. Sick and costly employees sticking with their current employers only for the health coverage because they would have costly pre-existing conditions for any new insurer are also in the process of leaving for new opportunities because they are assured of new coverage under Obamacare.

Even worse, the soaring premiums on the Obamacare Exchanges were calculated by health insurers on the assumption that the individual and employer mandates would succeed in forcing everyone to buy health insurance, the healthy and low cost as well as the sick and high cost. But with 93 million Americans, more than half of everyone with health insurance pre-Obamacare, losing their health coverage under Obamacare, and facing the incentives described above, the covered health insurance pool will not come remotely close to covering everyone, with the healthy, younger, and low cost being exactly the ones to drop out, and evade the mandates.

The pool the insurers end up covering, then, will be a lot more like the pool of all burnt down houses for fire insurers discussed above. The premiums the insurers receive from this adversely shrunken pool will not remotely cover the costs of that pool. Hence they will be facing bankruptcy next year, absent another taxpayer bailout of hundreds of billions. So the choice will be that, or socialized medicine, including the government death panels we see in every other country weighed down by this “enlightened” last century albatross.

In 15 states, only one insurer dominates with the majority share of the health insurance market, according to a new study from the American Medical Association (AMA).

The AMA used 2011 data to examine state and metropolitan areas, finding 10 states – Alabama, Hawaii, Michigan, Delaware, Alaska, South Carolina, North Dakota, Nebraska, Louisiana and Rhode Island – have the least competitive insurance markets.

It also found 15 states had one insurer with at least 50 percent of the commercial market share, while 45 states had two insurers with a combined market share of at least 50 percent.

“In far too many states, one or two insurance companies dominate the market, which can hurt patients, physicians and employers,” AMA President Ardis Dee Hoven said in a statement. “Without rivals to compete against, a large health insurance company can take advantage of patients by raising premiums and dictating important aspects of patient care.”

Low competition within the insurance industry could worsen with the health insurance exchanges, according to healthcare economists, as states with very little competition will likely see continued strong marketplace dominance by one or two insurers in the exchanges, FierceHealthPayer previously reported.

Alabama has the least competitive health insurance industry with Blue Cross Blue Shield accounting for 86 percent of the market, though the AMA noted Blue Cross’s share decreased slightly from 88 percent the year before.

Despite holding such a dominant portion of Alabama’s market, Blue Cross says it offers some of the lowest premiums in the country. “Our customers’ faith in us has provided us our market share, and we have to continue to earn that every day,” spokeswoman Koko Mackin told the Birmingham News.