Why The Administration Could Not Delay the Exchanges, Even When They Clearly Did Not Work

I think it is now clear why the Administration could not delay the exchanges, even when Republicans essentially cast them a lifeline during the budget debate by trying to delay the mandate by a year:  I think the Administration knew that a massive wave of insurance policy cancellations were already in the mail, and that the recipients of these letters would be facing huge price increases for their policies.

It is telling that the one thing you are NOT hearing from Administration officials in response to the policy cancellations is surprise.  If they were surprised, they would be yelling stuff like, "what the hell are those insurance companies doing?"  They knew this was coming, and you get the sense they were grimly bracing for it to be made public, hoping that perhaps their friends in the media would not make a big deal about it.

The minimum requirements on health plans that is driving these cancellations cannot at this point be cancelled.  Or, put more precisely, they could be cancelled but the act would be meaningless, because insurance companies have no way to suddenly go back to the old policies and pricing.  It takes too much planning to work out their product line and they can't just switch back on a dime.

So the huge wave of cancellations and price increases in the individual market was unstoppable.  That being said, the Administration has to be able to offer an alternative, and the only one they have is the hope one might get his or her new policy subsidized by other taxpayers.  But that is only possible through the exchanges.  So that had to be allowed to go forward and made to work, somehow.

There is no fix to this mess.  This is an avalanche that was loosed three years ago and cannot be stopped.


  1. morlockp:

    > There is no fix to this mess. This is an avalanche that was loosed three years ago and cannot be stopped.

    Let it burn, let it burn, let it burn.

  2. JBurns:

    And if there is full disclosure regarding the people who sign up through the exchanges it will reveal that the vast majority of the people who sign up for healthcare through the exchanges are:

    1) people joining Medicaid, or

    2) previously insured people who are forced onto the exchanges because their previous policy was cancelled.

    It will not be healthy 28 year old men who previously decided to go without insurance. As a result, this will do surprisingly little to change the number of uninsured people in the country other than by increasing the number of people getting Medicaid. The small gains in the number of people paying for insurance will be largely from the addition of people with pre-existing conditions who wanted, but could not otherwise get, insurance. While it is great that these people with pre-existing conditions can get insurance, to the extent this is not a financial bloodbath for the insurers it will be because the responsible people who were insured already are now paying multiples of what they previously paid.

  3. LarryGross:

    THe POTUS was wrong to make that claim and he repeatedly did so - no apologies from me.

    but the people who did have the independent market insurance - had no guarantee of continuing coverage and once they actually had a problem that was then called a "condition" - i.e. as in pre-existing condition then even
    without ObamaCare - they would lose their insurance.

    so what is a policy worth - that cannot deny you ?

    is it worth more than one that can?

    the concept of health insurance in the US (outside of employer-provided, Medicare and MedicaAid, Tricare for th military and the VA) is that you can only get it - if you are not sick and have not been sick if from a chronic or recurring problem.

    the only folks who could get insurance were the healthy.

    and once you got "unhealthy" you promptly lost your insurance and depending on your employment and condition - could go bankrupt.

    Now - you cannot be denied coverage even from a pre-existing condition.

    that has to be worth MORE than a policy that has no such guarantee.

  4. Andrew_M_Garland:

    To Larry Gross,

    You write: "the people who did have the independent market insurance (1) had no guarantee of continuing coverage, and once they had a problem, that was then called a pre-existing condition, then (2) even without ObamaCare (3) they would lose their insurance."

    (1) Each state regulates health insurance rates and terms. Do you have an example where health insurers terminated or drastically changed health plans, where other similar plans were not offered by law?

    (2) We see that ObamaCare has certainly caused plan termination. That is much worse than a hypothetical plan termination.

    (3) If you are insured and develop a new disease, then it is not a pre-existing condition under that plan, and you are not terminated in the individual market. What is an example to back up your claim that any new condition is considered preexisting?


  5. LarryGross:

    on (1) - have you heard of pre-existing conditions Andrew? DO you want me to GOOGLE it?

    (2) - people lose their insurance all the time guy.. it's a fact. and once they lose it, they
    cannot generally get it - on the open market. The only place people with pre-existing conditions can generally get it is with employer-provided, Federal and State employment, Medicare, MedicAid and Tricare.

    if you are trying to buy insurance on the open market and you have a "pre-condition" it's either not going to be available or it's going to be hugely expensive.

    can you imagine how many seniors, for instance, could obtain insurance on the open market if they did not have Medicare?

    (3) - yes you are correct -until you leave your employment and try to get it on the open market or if you have it on the open market - and you get sick and it's a chronic condition, they will not renew or they'll increase rates.

    Do you not believe that there is overwhelming evidence of people being denied insurance because of pre-existing conditions?

    how about this:

    Insurers Denied Health Coverage to 1 in 7 People, Citing Pre-Existing Conditions

    want more?

  6. Rick Wright:

    It's not just about "minimum requirements", in terms of coverage. One close friend (whose daughter has a chronic condition) got a cancellation letter, and it had to do with writing policies to be consistent across all states. It would have been too much trouble and cost to rewrite the policy/ies to conform with ACA so they just cancelled. So the issue was not so much "what does this policy cover?" (which might also be true) as "how do we write policies?" Not disagreeing with your excellent posts, but many defenders and critics of ACA alike aren't touching on this other reason why ACA is causing policies to be cancelled. In my friend's case, it wasn't even about forcing him to get a "better" (?!?) policy. The company just couldn't afford to make all these changes.

  7. LarryGross:

    re: " and it had to do with writing policies to be consistent across all states. It would have been too much trouble and cost to rewrite the policy/ies to conform with ACA so they just cancelled. "

    in fairness.. isn't the idea to require across state policies also one the GOP has supported?

    I think our current system is such a rabbit warren of laws, regulations, rules, etc that any change to it
    is going to cause disruptions including unintended ones...

    even with all of this mess - I wonder if the country would actually want to go back?

  8. MingoV:

    I read elsewhere today that the government expected that 40-67% of insured people would lose their policies. I keep thinking of car commercials:


    6 point font: *If it is one of the few insurance plans that meets the inappropriate or absurd criteria laid out somewhere in the 906 pages of the PPACA.

  9. perlhaqr:

    in fairness.. isn't the idea to require across state policies also one the GOP has supported?

    I believe "allow" would be a better word to use there, but I could be mistaken.

    I know for certain that health insurance companies are not (or were not, before the ACA go-live date, I don't know for certain now) allowed to operate across state lines. So, instead of having one Blue Cross / Blue Shield company, with all the attendant separate HR departments, paperwork requirements, etc, there were 51 of them (one for DC). I have seen GOP support for eliminating that barrier.

    I also know that different states have different minimum requirements for what health insurance policies have to cover. It may be the case that the GOP supported requiring a leveling of that playing field, but I have no idea one way or the other.

  10. LoneSnark:

    If you already have a policy, they cannot deny renewing your policy due to an existing condition. A pre-existing condition is a condition you had before they insured you. My current open-market policy was renewed twice, for three years of coverage. I developed two modestly expensive conditions prior to the last renewal. And yet, they renewed me like they renewed everyone else. Because my conditions were not pre-existing, per the contract I signed with them they cannot take them into account when determining my premiums. My premiums would have gone up over time as I aged, as getting older is a pre-existing condition I was born with, but as I understand it, as long as I never let my premiums lapse or cancel my coverage, that is all. Of course, Obamacare did manage to get my insurer out of the hassle of paying for my medical conditions, because my coverage is now illegal and will be discontinued December 1st 2014 (I don't know how they're getting around the law to provide continued coverage that long, but they are).

  11. LarryGross:

    re: "allow" - but wasn't the point that the GOP was touting that as a better alternative to the ACA?

    and to do that -would require that the Federal Govt get involved in insurance and supplant the states role.


    but even doing that would not help those that lose their coverage.

  12. LarryGross:

    well a lot of younger people would not save for retirement, get auto insurance or insure a home with a mortgage unless required to.

    you are correct about MedicAid but are you aware of the changes to ERs charitable care reimbursements.? The theory is that it's cheaper to have the indigent on MedicAid with a regular doctor rather than showing up at ERs for care.

    re: " because the responsible people who were insured already are now paying multiples of what they previously paid."

    it depends on the size of the insurance pool. The smaller pools are more susceptible to higher individual costs than the bigger pools.

    that's another benefit of "across state lines" - much bigger pools that state pools.

    Medicare has 50 million people in it - a huge pool and even though many pay only about 100.00 a month - the program is currently stable - the threat being the downstream boomer demographics.

    Medicare costs taxpayers about 250 billion a year for about 50 million and if everyone paid $400 a month, it would come close to breaking even.

    that's an age group that heavily use health care but the huge pools moderate costs. A lot of seniors on Medicare get REGULAR care and catch problems quick and manage them whereas uninsured will
    get sick and not see a doctor..wait until the end up at the ER where heroic and huge costs are
    needed to treat things that could have been treated much cheaper at an earlier stage with a primary care doc.

  13. LarryGross:

    yes you can - but it can cost the employer if you have an expensive illness and ultimately result in increased premiums for others on the same plan.

    the Local school premiums went up for everyone when 3 people out of 3000 had large expenses... so the next year premiums went up for everyone.

    so you are safe until you leave your job or are forced to - then what?

    that's what is happening to a lot of people in a tight job market. They lose their job
    and along with it their insurance that was forced to cover pre-existing conditions.

    there are suspicions that some who excessively use their health insurance are deemed less desirable as employees... sort of a potential unfunded liability.

    we have a system of winners and losers. you're luck to have employer-provided but you're one step away from big trouble if you lose the job - then you join the losers.

  14. mesaeconoguy:

    Correct, this disaster cannot be reversed now, so we need to do a little game reset - this is a combo answer to this post, and the "lying or ignorant?" post earlier.

    1. We know that Obama is incredibly economically ignorant, more so than nearly every other president, ever, given his policies and actions. That gives him some cover on the ignorance side.

    2. We know that Obama said multiple times, unequivocally, that you would be able to keep your policy, if you liked it. That turned out to be laughably false, as many of us predicted.

    3. We now know that Obama’s administration knew of the likelihood of mass policy loss, and chose to cover it up (see also Benghazi, Fast & Furious, etc.).

    Obama has a well-established pattern of trying to distance himself from the adverse consequences of his own actions, but this one is so large and egregious, mostly thanks to his own doing, that this Obamascare albatross is tied around his neck. He likely was intentionally lying about the “keep your plan” aspect, but didn’t think it would be this bad (economic ignorance).

    Now, there clearly is rank incompetence in all this, especially with the exchange rollout, but at some point the question arises, how much of this is incompetence, and how much is due to corruption? Incompetence easily masks corruption, and is the preferred method of concealment.

    The sheer size of Obamascare means that small “glitches” and misaligned incentives get magnified exponentially, and that the overall impact is already disastrous (we knew some of that from the piss poor employment non-recovery).

    Obamascare may wind up being worse than Smoot-Hawley, and do more damage than the NIRA would have.

    But we are now stuck with it. You voted for this idiot America, twice.

    Nice job. You’re screwed.

  15. mesaeconoguy:

    When that proves to be true (I believe you are correct, and the numbers so far reflect it), the program will collapse.

  16. David:

    "The avalanche has already begun; it is too late for the pebbles to vote" - Ambassador Kosh, Babylon 5.

  17. Andrew_M_Garland:

    To Larry Gross,

    You are running a bait and switch argument. You commented: "the people who did have the independent market insurance (1) had no guarantee of continuing coverage" for a pre-existing condition.

    "Independent market insurance", you know, the insurance one buys on the independent market. But, your reply is insulting. The discussion is not about the existence of pre-existing conditions, but about one supposedly losing coverage for medical conditions if they arise during insurance coverage.

    You have yet to provide an example for your direct statement. Do your own googling to support your own point.

    Employer provided insurance is another thing. Maybe you can find an instance where employer provided insurance no longer applies after the employee leaves, and then independent insurance fails to cover conditions which arose during employment. Is there such a case?

    Anyway, that is not what you originally presented. The rest of your reply is a non-sequiter. It doesn't follow from what you first wrote.

    If you can't support your original comment, then I understand.


  18. LarryGross:

    well it was not intended to be insulting. it was intended to point out. I did point out that keeping insurance when conditions arise only is true as long as you keep that job - and that is a real issue in today's job market.

    I believe the issue was how many people does this happen to and I provided data that shows that about 1 in 7 are denied coverage because of pre-existing conditions. that's not a small number.

    when leave an employer - you lose the insurance. right? and if you leave an employer with a pre-existing condition and look for insurance on the independent market, it's not easy to find a policy.

    is this the comment: " You write: "the people who did have the independent market insurance (1) had no guarantee of continuing coverage, and once they had a problem, that was then called a pre-existing condition, then (2) even without ObamaCare (3) they would lose their insurance."

    independent insurance is not guaranteed. They typically sign you up for a period like six month or two years and then they have the option of ...not renewing....which is what they are doing right now with ObamaCare but it's also what they do with people who develop expensive conditions... they just won't offer continuing coverage.

    Do I know people personally that this has happened to. Yes. but the overall data
    shows this and I did provide you a link showing that people are denied.

    I'm not sure why you consider this bait and switch. It's all part of the same issue about whether or not people can continue to access independent insurance or not - and the various reasons why the companies would refuse to renew.

    my apologies if you think I done wrong.

  19. marque2:

    GOP didn't support policies that are the same across states, they wanted to allow you to enroll in out of state plans.
    Of course it wasn't a brilliant idea because the plan in your state wasn't expensive due to lack of competition, it was expensive because of all the mandates - so if you went out of state, that insurance company would have to charge you more to cover your states mandates, and then since they don't have the inside scooop to your state, they are probably less efficient at processing and would probably charge you more.
    Of course politiicans in those states did what they did cause folks always like something for "free" and with medical costs hidden by companies folks didn't really see that the "free" lazer armpit hair removal service which sounded so neat was being paid by their company, and probably resulted in getting a lower salary / raise. We all pay for it in the end.

  20. marque2:

    You are right, it was allow, and there was nothing about forcing every state to have the same policies.

  21. marque2:

    I can tell you, you are wrong without even reading your post. I have gotten that good at intterpreting you!

  22. marque2:

    You are really busy between all the healthcare posts you are doing all over and the 100's of minimum wage posts over at Carpe Diem. I hope they pay you well for this. I get hand cramps just thinking about how much left wing rhetoric (lies) you post!

  23. marque2:

    Bait and switch, and contradicting himself when it allows him to make a point, changing the subject are all his modus operandi.

  24. marque2:

    Another good reason for insurers to cancel. The get rid of a lot of obligations like yours and can charge twice as much for you now.
    Interesting angle, thx for bringing it up.

  25. marque2:

    Hah, what program has collapsed because of lack of funding? Medicare will just collapse in 2020 rather than 2023 and they will just raise taxes on us.
    Government programs are like leprosy, continually growing taking over more and more of the body, with no medication to stop it. If you are lucky it can be controlled for a bit.

  26. mesaeconoguy:

    The “beauty” of the current macroeconomic situation is that the economy already sucks, and this is pushing it off the cliff.

    Even if these totalitarian Clouseaus wanted to fund this, they would have to either let prices rise within the program, further killing economic activity (this acts as another giant tax), or come up with alternate funding, either via an outright tax which would kill growth more, or going to the public funding well again (floating more debt).

    Medicare/Medicaid is done. This killed it. And keep your eye on the Treasury cash burn rate after the whole program kicks in – it’ll be astronomical, and exhaust existing funding at least twice as fast as anticipated.

    Good luck raising the debt limit again Barry, in the context of this disaster. Reassure the Chinese that everything’s just fine, and that UST bills/notes/bonds are strong as ever.

    Most people do not understand how close our entire economy is to full implosion.

  27. LarryGross:

    don't they already have that ability without any action from the Feds? Why would any state want to do it and if they are "allowed" why haven't they?

    the point here is, has the GOP offered - as legislation that they support as a party,
    any alternative?

    How many repeal votes as a party and how many "replace" votes?

    hasn't the GOP "promised" a REPLACE?

  28. bigmaq1980:

    Agree on most all but on the "economically ignorant" part. Perhaps more accurately, we can say the philosophy he operates from is massively faulty. He's got guys like Nobel Laureate Paul Krugman cheering him on, giving him the "economic basis" for his policies. We can debate on how ignorant even Nobel prize winners can be about economics, but that is another issue altogether.

    Obama is better described as so strident that he either is delusional about reality, or he chooses to ignore it. After the past five years, I bet the latter, as it is all about power to him - keeping it and exerting it. This seems to explain the whys behind all three of your points, his "leading from behind", and his "distancing himself from adverse consequences".

    Why so strident? From his behavior and what he has said, IMHO, it appears that his motivation is for personal aggrandizement, not necessarily a true belief in what is good for the country. He wants to create a "legacy" that is on the scale of at least Reagan, if not Washington, or Lincoln. Therefore, end justifies the means.

  29. mesaeconoguy:

    That is tricky to assess completely.

    The underlying premise of Obama’s, and Regressive economic doctrine is that taxes don’t have adverse impact, and that people don’t respond to economic incentives (or disincentives, in the case of taxes).

    Both of those are wrong, and Obama clearly believes both of them wholeheartedly.

    The populist Krugman cheerleading corps is mostly a distraction – Krugman has made himself into a caricature, and most professional economists no longer take him seriously, though his brand still carries weight with the shrinking NYT subscriber base. Obama may be dumb enough to believe this supports his cause, tough to say.

    Economic reality is in direct opposition to his beliefs – his ignorant policies have made the economy much worse off, yet he appears to be blind to this evidence. So back to the original question: Is this due to ignorance, or something else?

    I personally believe it is something else, that he fundamentally is a socialist/collectivist (that would be evident if we saw his full college transcripts, and extracurriculars), and that he is actively causing at least some of this failure/economic sabotage. His ignorance is along for the ride, but I believe that he wants to break more than a few eggs to make his totalitarian/corporatist/neofascist omelet. People ignore this at very great risk.

  30. marque2:

    Young people don't do these things for two reasons. First they need the money to start up in life. You need to worry about getting your first home before you get extra serious about retirement. Secondly, in this day and age, they are trained early on the government will take of them, why bother?

  31. LarryGross:

    not true. they have to pay FICA taxes for SS. They have to get auto insurance if they have a car, if they buy a house the mortgage company requires insurance and when they have their kid - they want to be able to help him when it gets sick.

    It's been this way for a LONG LONG TIME - long before Obama was born in fact.

  32. nehemiah:

    Me thinks our dear leader doesn't much care how the exchanges work or whether there are dislocations that put citizens at risk. He wants to overload the system, break it and then mandate that the gub'mint take everything over for the sake of the people. We'll have national single payer by the end or his term unless the Rhinos get on board with defunding it all costs.

  33. Undisclosed:

    Clearly, under Obamacare increasing costs on insurers forced to pay for bad risks could not possibly result in increasing costs to constituents. Obamacare will be funded entirely by leprechaun gold.

  34. Gdn:

    Relieving monopolies (allowing competition across state lines) is different from requiring uniformity (requiring plans be the same across state lines).

  35. Gdn:

    Lots of alternatives have been offered. Prior to Obamacare, even Democrats offered lots of alternatives.

  36. Gdn:

    "most people do not understand how close our entire economy is to full implosion".

    Last numbers I saw suggest 2.3 Trillion in...as permenant debt...to get 0.3 Trillion out.

  37. LarryGross:

    40+ repeal votes.. what replace legislation was offered instead?

    "ideas" are not proposed legislation that elected vote for... you have to agree as a party what you are going to agree on - as a party - to propose as an alternative.

    there have been no alternatives offered... just various individual "ideas".

  38. LarryGross:

    can you give an example of 'competition' across state lines that not be the same plans because the same companies compete in different states but with different products that are only good in that state.

    how do you do "portability" with the same company from one state to another?

    and if that was/is the case - then why do we not see it and it is stated to be a problem?

    are you saying that portability across states is not a problem? or that companies COULD offer it but don't or that they cannot do it because of state regulations?

    at any rate - ANY proposal that would make that better - coming from the GOP would constitute a real alternative but it still does not keep the companies from dropping people.