President Barack Obama announced Thursday that his administration would not enforce key provisions of the Affordable Care Act that have caused an estimated 5 million Americans to lose their health insurance.
The constitutionally-dubious proposal comes as the beleaguered president faces a tidal wave of anger and mistrust stemming from the disastrous consequences of his signature achievement. The proposed change is a transparent attempt to repair the broken promise that helped the White House sell the ACA, also known as Obamacare, to the American people and moderate congressional Democrats – “If you like your plan, you can keep it. Period”.
That promise shattered to pieces last month as insurance companies began issuing cancellation notices to millions of Americans whose plans do not conform to laws definition of acceptable health insurance.
In Maine, more than 10,000 individual policyholders have received cancellations or forced plan modifications because their plans did not meet Obamacare’s standards outlined. In contrast, just 271 Mainers have signed up for plans at the glitch-ridden healthcare.gov exchange, according to government data.
The Maine Bureau of Insurance did not receive advanced warning about the president’s declaration and said it will take approximately a week to review the policy change. A spokesman declined to comment until the Bureau has fully reviewed the policy change and its implications for Maine.
People in the insurance industry believe the proposal is likely to cause more problems than it solves and is unlikely to help those who have already received cancellations.
In what industry insiders called a surprising move, the National Association of Insurance Commissioners (NAIC), a non-partisan group comprised of state insurance regulators from across the country, quickly issued a statement expressing concern at Obama’s unusual policy change.
“The NAIC has been clear from the beginning that allowing insurers to have different rules for different policies would be detrimental to the overall market and result in higher premiums,” said NAIC. “We have expressed these concerns with the Administration and are concerned by the President’s announcement [Thursday] that the federal government would use its “enforcement discretion” to delay enforcement of the ACA’s market reforms in 2014 for plans that are currently in effect.”
The association said Obama’s 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.”
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Dan Bernier, a Waterville-based attorney who represents insurance agents, said the president’s proposal will likely create more headaches in the individual insurance market.
“The reality is it will be very difficult to do and will likely result in rate increases,” said Bernier.
Bernier said the difficulty in implementing the president’s proposal lies in how a company would compute rates for people who are brought back after receiving a cancellation notice.
“You will not know which people will come back,” he said. “That major unknown will be very hard to rate for,” he said, adding that such conditions will likely create an adverse selection problem, causing rates to increase.
Another problem with the policy change, he said, is the requirement that insurance carriers send notices to people advertising plans available on the exchange. Such notices would have to include statements touting the added coverage options included in plans purchased on the exchange.
“That is like asking Coca-Cola to put a notice on its bottles saying Pepsi is better,” he said.
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Obamacare’s myriad dysfunction extends beyond the individual market and the president’s decision to selectively enforce the law.
In the small group market, where most businesses buy health insurance for employees, big changes are headed down the pike.
Joel Allumbaugh is the Director of MHPC’s Center for Health Reform and CEO of National Worksite Benefit Group, an insurance company that deals with many small businesses in Maine.
“Of our small group clients, none will be able to keep their plan once they renew in 2014,” said Allumbaugh.
“The issue is the requirement for plans to have “essential benefits” and actuarial values to meet bronze, silver, gold, or platinum status,” he said. “This completely changed the small group products for 2014. Not a single small group plan sold in 2013 fits that standard.”
He said 90 percent of his clients in the small group market will see higher premiums for less coverage when they renew their plans in 2014.
Insurance companies have had to get creative in order to deal with Obamacare’s changes, said Allumbaugh, and that translates into higher out-of-pocket costs for more common services, limited prescription formularies, and other limitations that will be new for policyholders.
“[Policyholders] may not fully understand the impact until they start spending more for services, but the impact will definitely be felt by many, not just the high users of medical care but also lower and moderate users,” he said.
In Augusta, the abysmal launch of Obamacare has become a political liability for Democratic state lawmakers interested in using Obamacare funding to expand Maine’s medical welfare program, known as Medicaid or MaineCare.
Obamacare provides limited funding for states that choose to expand Medicaid, a top selling point for pro-expansion Democrats. But Republicans now say the Obama administration’s string of broken promises shows that Maine cannot rely on the federal government to fund an enlargement of the welfare rolls.
“The President and Congress broke their promise to the American people about being able to keep their health insurance, and it makes me wonder, will they break their promise to state governments to pay for most of welfare expansion if we choose to participate?” said House Minority Leader Ken Fredette (R-Newport).
Fredette said expanding Medicaid is a bad deal even as proposed. “Considering Washington’s inability to keep its promises and manage its finances, it could be even worse,” he said.
While Democrats have scoffed at the notion that the federal government might curtail its promised funding for Medicaid expansion, Obama has twice proposed doing exactly that.
During the “super committee” deficit-reduction talks in 2011, Obama proposed reducing federal funding for Medicaid expansion by $100 billion over ten years, leaving states to pick up the difference.
The president’s official budget for fiscal year 2013 also proposed changes to Medicaid funding rates that would have increased the cost to states. The proposed $18 billion reduction over ten years would have had a dramatic effect on how much a Medicaid expansion could cost State governments after 2014.
The bad news surrounding Obamacare will also have implications for U.S. Rep. Michael Michaud, who voted for the law in 2010 and is now challenging Republican Gov. Paul LePage in the 2014 governor’s race.
Michaud, who has occasionally defended the law, will likely face hard questions throughout the campaign over his support for Obamacare.
On Friday, Michaud did not join 39 House Democrats who defied Obama by voting in favor of a GOP proposal that would allow people to keep their health insurance plans. The bill, sponsored by Rep. Fred Upton (R-Mich.), passed 261-157, but is certain to meet a presidential veto if it manages to pass the Senate.
The next big round of cancellation letters will likely arrive in policyholders’ mailboxes just weeks before Election Day next November.
Steve Robinson
Maine Wire Reporter
SERobinson@themainewire.com