President Barack Obama has announced that he will allow private insurance companies to extend policies that would have had to be canceled because they didn’t meet the requirements in the Affordable Care Act (ACA), but with just six weeks until the end of the year pulling back policies that were going to be scrapped might not be realistic.
“Since the products were being canceled, insurers didn’t submit them for approval to state regulators,” writes Citi analyst Carl McDonald. “Before the product can be submitted, insurers have to go back and calculate 2014 premium rates. This didn’t happen before, because again, the policies were being cancelled. In addition, insurers will have to re-program computer systems in order to bring the cancelled policies back online.”
ACA’s canceled insurance plans arrangements
Completing all this by the end of the year will be challenging and will put some pressure on margins for plans that are suddenly re-continued. Some plans had already made arrangement to let people renew before the end of the year (e.g. renewing on Dec 1, 2013 and getting coverage outside of ObamaCare regulations until Dec 1 2014), and many plans, particularly those dealing with companies instead of individuals, won’t be affected at all, but at this point every complication, even ones that could be overlooked if the rest of the rollout had been smooth, will count heavily against the program’s reception.
ACA’s extension allows healthy people to stay out of Obamacare
What’s potentially even more damaging is that the extension allows healthy people with minimal plans and catastrophic insurance to stay out of ObamaCare, which makes the exchange pool less healthy on average. This will drive up costs for insurers and probably drive up premiums for anyone who wants to sign on. Now that insurance companies aren’t allowed to adjust rates based on prior medical conditions, getting healthy people into the exchanges is a key part of making the whole system feasible.
Obama still has a couple of years to make this work. Even if Republicans come out ahead in the next mid-term elections, there’s basically no chance they will be able to override his veto in both houses, but his one chance of sticking it to the other side with a strong start is long gone.