The Right Prescription

Insurance Companies Deserve Obamacare

HHS edicts: fair punishment for quislings.

By 12.20.13

Obama with, among others, the CEOs of Merck and Kaiser Permanente. UPI
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The latest attempt by the Obama administration to avoid the consequences of its inept implementation of the Affordable Care Act has been to issue yet another of its surprise edicts. This new Health and Human Services regulation, which was announced Thursday night, “significantly relaxed the rules of the federal health-care law for millions of consumers whose individual insurance policies have been canceled, saying they can buy bare-bones plans or entirely avoid a requirement that most Americans have health coverage.” 

This last minute movement of the goalpost comes on the heels of another HHS rule change, issued a week ago, that essentially forces insurers to provide retroactive, discounted coverage to the many Americans who are about to lose their insurance plans because of Obamacare. Insurers are not amused. The statement released by the President of America’s Health Insurance Plans was typical: “This latest rule change could cause significant instability in the marketplace and lead to further confusion and disruption for consumers.”

The administration’s latest regulatory caprice brought swift condemnation from Capitol Hill as well. Florida Senator Marco Rubio responded thus: “Holding a fire sale of cheap insurance is not a responsible fix for a broken program. This is a slap in the face to the thousands of Americans who have already purchased expensive insurance through the Obamacare exchanges.” The White House and HHS claim, however, that this is really no big deal. They assert that the rule change will only affect a few hundred thousand people.

It goes without saying, of course, that neither the President nor his HHS Secretary has any legal right to make this arbitrary rule or the one announced last week. As Avik Roy correctly points out, “These exemptions will substantially alter the architecture of the law’s insurance marketplaces.” And such dramatic changes require the consent of Congress, particularly when they involve exchanges created by states. But legality has never been a serious consideration for Obama or Commissar Sebelius.

Moreover, the negative effects of the rule changes will be felt mostly by insurers, and the administration knows that few tears will be shed for the plight of Blue Cross Blue Shield or Kaiser Permanente. The electorate regards the industry with a jaundiced eye. And insurers did nothing to improve their public image by entering into a Faustian bargain with the White House whereby they agreed to promote Obamacare in return for potentially enormous profits from millions of new customers who will be herded to them by its exchanges.

In 2012, the health insurers kept their part of the deal by spending $216 million to pimp Obamacare, but the president and his accomplices began double-crossing them as soon as it became politically expedient. Before the latest two imperial decrees, for example, the administration postponed implementation of the employer mandate for a year and delayed the beginning of the 2015 enrollment period until after the upcoming midterms. These rule changes will cost health insurers millions in expected premiums.

Yet even after these betrayals, the representatives of the insurance industry were actually surprised by the latest arbitrary edicts. After last week’s rule change, the National Association of Insurance Commissioners issued the following statement: “This decision continues different rules for different policies and threatens to undermine the new market, and may lead to higher premiums and market disruptions in 2014 and beyond.” Officials from America’s Health Insurance Plans issued a similarly querulous statement.

But the nation’s insurance executives are evidently so drunk with greed that they still think they have a deal. They are still betting big money that Obamacare will turn into a cash cow. The Wall Street Journal reports that insurers will spend $500 million promoting the Affordable Care Act in 2014. In fact, one company plans a huge ad buy before the end of this year: “WellPoint…said it expects to spend up to $100 million by the end of this year on TV, social media and print ads targeting mostly young and healthy people.”

This Wellpoint pitch is, if possible, even more naïve than the expectation that the government will stop changing the rules in the middle of the game. While it may be true that the public school system has steadily eroded the critical thinking skills of the nation’s young adults, they are still not dumb enough to pay exorbitant premiums for health coverage they neither want nor need. This is particularly true if a viable alternative is available. And there is, in fact, a better choice. The penalty for not carrying insurance is only $95.

And, sure enough, they are not signing up in large enough numbers to prevent Obamacare from collapsing under its own weight. As the Atlantic reports, “18 to 34 year olds have only made up about 20 percent of enrollees in states we have data for. That's half of what they need to be for the system to work. Otherwise, premiums could rise, which could make more healthy people forgo insurance—and premiums could rise again.” This is the “insurance death spiral” that arises when low-risk individuals choose to remain uninsured while high-risk individuals enroll in droves.

Obamacare’s perverse incentives have rendered this death spiral virtually inevitable. Thus, the health insurance companies will suffer the same fate as all of Obama’s other collaborators in the fraudulent cause of health care “reform.” Just as the quisling strategies of the American Medical Association and Big Pharma have already hurt physicians and stunted medical innovation, the role health insurance companies have played in perpetrating Obamacare will inflict serious damage on their own industry.

It is not a coincidence that many of the people who promoted the “Affordable Care Act” are now claiming that its travails are rooted in the decision to allow insurers to play a role. These people will increasingly claim that a single payer system is the only cure for Obamacare’s ills. And they will advocate the eradication of insurance companies from American health care. That would be condign punishment indeed.

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About the Author

David Catron is a health care consultant. He has an MBA from the University of Georgia and blogs at Health Care BS.