Framing the ACA Disaster: Getting Ahead of the Curve

Read nyceve's rec listed diary, and followed the link through to Bob Laszewski's post entitled "The Obamacare Rollout: The Administration Needs a Plan B––Now!", and got to thinking about the real scale of the rollout disaster -- and it is looking like a genuine disaster -- and trying to think if there's anything to be done to get ahead of what just might be a genuine political defeat for the Democratic Party in next years elections.  

What follows is a succinct statement of the problem from the WaPo:  

Here's how Robert Laszewksi, an insurance consultant, put it in a note to clients earlier this morning:

This means that the insurance companies have 32 days to reprogram their computer systems for policies, rates, and eligibility, send notices to the policyholders via US Mail, send a very complex letter that describes just what the differences are between specific policies and Obamacare compliant plans, ask the consumer for their decision —  and give them a reasonable time to make that decision —  and then enter those decisions back into their systems without creating massive billing, claim payment, and provider eligibility list mistakes.

All by January 1.

To explicate:  According to Laszewski, we know that there are 1) over 4 million who have received cancellation letters and 2) many more (who knows how many millions) who have tried to investigate the healthcare.gov website, but who haven't been able to sign up; and they all need to have their applications processed by December 15th, in order to have their policies in effect by January 1st.

Bob Laszewski -- The Administration Needs a Plan B––Now!

Then there are all of those people who want to buy coverage for the first time on January 1. Like those who have received cancellation letters, they also have to sign-up by December 15 to have any hope of being on the rolls by January 1. And, no one ever planned for the possibility that we would have back end-loaded hundreds of thousands or even millions of people into a two-week period between December 1 and December 15.

We can all debate just how many people will eventually sign-up for Obamacare or whether the administration has any chance of making its first year goal of 7 million people. But, there is no doubt in my mind that hundreds of thousands if not millions of people do want to sign-up and be covered on January 1. Clearly, there are lots of people who have been patiently waiting for the day they could get coverage for their pre-existing conditions and who need the subsidies to buy insurance. And, then there are the millions who have already received their cancellation notices in the individual market and need to enroll in a new plan by January 1.

The administration needs a Plan B and they need it now.

 

Watching President Obama's demeanor at the press conference, it looks like he's acknowledging that the website is not going to be fixed by December 1st.  No, he didn't say that, and he may even still believe (or hope) that it will be working by then.  Even if it's working by then though, will it be prepared for that kind of volume?  Color me, and lot's of other, skeptical.  Bob Laszewski -- Rollout Week 5:

The most urgent need is for the government to fix the back-end enrollment transactions between the government and the health insurance plans (the 834 problem). It will be impossible to conduct any kind of high volume enrollment through the health portal's front door so long as the data being transmitted to the insurance companies is unreliable.

Has the government made progress in fixing the large variety of detailed 834 transaction issues?

Yes. But the progress so far is incremental and nowhere near enough to be able to go to high volume processing.

The Obama administration finally seems to have a strong group of experienced managers in charge of fixing Healthcare.gov. I don't mean to pile anymore bad news on them then they already have. But I also have to report that the confidence that this can all get fixed by December 1 is not high among the people on the other end of those 834 transactions.

 

Now, don't get me wrong:  this is a problem that people created, and people can solve it.  It can be done.  But we have to have a realistic view of what is and is not possible in the current political environment.  

Because if there is a need for any, and I'll go so far as to repeat that, if there is a need for ANY legislative fix, it won't happen unless we take back the House in 2014.  Anybody disagree with me about that?  Didn't think so.  

So, legislative fixes are off the table, at least for the next year, in all reasonable expectations.  (IF anything, this may lead to a replay of the the debt-ceiling debacle in January; with the sequester in place, and the debt ceiling as leverage (and many Republicans do still see it as leverage), the only thing I can see the House doing is trying to starve HHS for resources to finish fixing the website.)  That means the Administration's only option is to rely on the states and the insurance industry to work with them to try and get through the next year.  Again, Laszewski:  

Millions of people are facing those cancellation letters. Ideally, we could just say, never mind––let these people simply stay on their current policies. But here's maybe the biggest irony in this whole mess. The Obama administration may not be ready for Obamacare but the insurance industry is. The health insurance companies spent the last many months rolling their old policies off the books and replacing them with the 2014 Obamacare compliant products––Bronze, Silver, Gold, and Platinum.

Cancellation letters have been sent. Their computer systems took months to program in order to be able to send the letters out and set up the terminations on their systems. Even post-Obamacare, the states regulate the insurance market. The old products are no longer filed for sale and rates are not approved. I suppose it might be possible to get insurance commissioners to waive their requirements but even if they did how could the insurance industry reprogram systems in less than a month that took months to program in the first place, contact the millions impacted, explain their new options (they could still try to get one of the new policies with a subsidy), and get their approval?

The Obama administration told the carriers to be ready on October 1 and they are ready. You just can't waive a magic wand and put Humpty Dumpty back together again.

 

That's going to be a big ask of the states and the industry, but really, they don't have much of any other option:  if they aren't willing to help out, the entire industry could be facing the dreaded actuarial "death spiral" be this time next year.  As nyceve pointed out in her diary, AHIP is already screaming bloody murder:  

AHIP is guaranteeing huge premium increases.

And the AHIP warnings reached a crescendo today, after the Obama announcement.

The announcement by President Obama, that there will be a one year reprieve so people can keep their low cost junk insurance, will result in a huge spike in premiums in 2015.

We've been warned.

(snip)

The death spiral is when the risk pool is comprised of an older and sicker population, this is what we, as a nation are facing. What you're seeing unfold with the roll out of the ACA are not garden variety speed bumps.  This is the unraveling of the fundamental premise of the Affordable Care Act--a vastly increased risk pool in the utterly broken individual market. It was expected that all the new young and healthy bodies would mitigate the cost, to some extent, of all those desperate Americans the for-profit insurance industry had refused for generations to insure due to pre-existing conditions. But now, it is believed, they will remain with their cheap (not worth the paper its printed on), junk insurance, so the risk pools will be filled with old  and sick folks. This is the death spiral writ large.  (emphasis in original)  

(snip)

Healthier people are more likely to stay in the pre-Obamacare plans; they're probably more okay with a bare bones (not worth the paper it's printed on) benefit package. And this will undoubtedly drive up premiums in the new Obamacare markets.

What was announced today is a quick political fix. It will come back to bite Democrats big time ahead of the 2016 elections as premiums skyrocket in 2015.

Here's the other problem that I believe I see, that nobody else has stated, at least that I've seen, just yet: Assuming that the industry and the state insurance commissions cooperate and extend the existing policies for another year, my guess is that those policies will still see immediate and substantial increases in premiums THIS YEAR. After all, the insurance industry is going to have to spend a lot of money, and take a lot of risk, re-programming their systems, etc. (all of the problems identified by Laszewski above).  So, they have a built in excuse to gouge their customers immediately, plus they can blame it all on the President, And they will claim that they are saving the President's bacon, which means that they will expect something in return politically. Which means a legislative fix of some kind, probably some preferential tax treatment for extending those plans for another year (i.e., more money on the back-end).  Normally, one might think that the Republicans would go along with preferential tax treatments for the insurance industry; but that was before they made the destruction of Obamacare their primary reason for existence.  

One way or the other, the biggest problem for the President, and the Democratic Party, is time; time to get the website up and working, time for people to start actually receiving benefits under the legislation, time to make the argument that the ACA is working; and the only way to trade for time, is going to be to trade money for it, i.e., tax breaks for the insurers (who don't want the enrollment period extended), tax credits for those who have to continue in their crappy non-ACA-compliant policies, possibly giving tax breaks to younger, healthier enrollees;  I certainly don't have a long list of proposals off the top of my head, but in every instance, it seems to me that they only way to buy time is going to be to by tweaking tax incentives.  Which the Teapublican House will not go along with.  

One possible fix along these lines would be to extend the enrollment period another ninety (90) days, or more.  Since the insurance industry will be against that, they'll have to be bribed to go along with it, hence special tax breaks associated with the cost of extending the existing policies (as cover for the bribe), and some incentive for them to believe that younger enrollees will still join;  again, a tax break, maybe even a credit, for anyone under the age of say 45 who enrolls before the extended deadline expires.  That gives time to get the website working, and time to get young people enrolled (which is the linchpin for the insurance industry).  

Again, yes, these are legislative fixes.  Which the House will not go along with.  But here's the thing; if these fixes can be proposed sooner rather than later , then the obstruction of the House can be a campaign issue next year. 

Which is why this proposal, or something like it, needs to get put together pretty quickly.  The Democrats need to get ahead of the curve on this, and start framing the issue for the campaign:  

This is a solvable problem.  We can make it right.  This is how we propose to do it.  The Republican House won't act on it.  But don't worry; if you vote for us, we will pass this legislation, retroactively, on the first day of the next Congress.

As far as I can see, this might be the only way to prevent an absolute ass-kicking in the next couple of elections.  More importantly, it may be the only way to save health care reform, and this Presidency.