Judging Obama's ACA Fix

So today, trying to stem the tide of hand-waving and panic that reminded us all of how Democrats have traditionally acted, Barack Obama announced that people who have health-insurance plans they bought in the individual market but don't meet the standards of the Affordable Care Act may get to keep those plans. So how should we feel about this?

On the most basic level, it's not a good thing. Any time someone stays on a junk insurance plan instead of entering the larger risk pool of the exchanges, that pool is weakened. Having said that, the specifics of what Obama proposed do seem designed to minimize the damage.

The first thing to understand about Obama's proposal is that it allows insurance companies to continue offering substandard plans for another year. There's a crucial distinction here between allowing them to offer these plans and requiring them to. The bill sponsored by Democratic senator Mary Landrieu would require it, which would push people toward keeping their crappy insurance as the default option requiring the least amount of thought and effort.

Allowing the insurers to continue the plans is greatly preferable to requiring it, because many of them won't bother, or will offer the plans just to some people and not others. After all, the insurers have been proceeding on the assumption that the substandard plans are done at the end of the year, and they've been focusing on what they can offer through the exchanges. Some will continue to offer the substandard plans, but making it optional limits the damage this move does by keeping down the number of people who stay in their old plans.

Obama's plan also forces the insurers who are offering the substandard plans to inform people that they might be able to find something better on the exchange, and also inform them of what their old plan doesn't cover. This is a good idea too, not just because more knowledge is better, but because it will encourage people to find out what they can get. With those cancellation letters that were sent to hundreds of thousands or even millions of people, the insurers tried to get people to buy new, more expensive plans. Their hope was that they'd read the letter and say, "What? I have to pay three times as much to keep my insurance? Damn you, Obama! Oh well, if I have no choice, I guess I'll write the check." The last thing the insurer wanted was for that person to check the exchange, where they might find something much cheaper.

Of course, this was all made worse by the fact that unless you were in a state with a well-functioning exchange, when many people got those letters they couldn't find out what was available, because the web site wasn't working. But that's no longer the case.

I was pleased to see Obama talk in his press conference about just how crappy the existing, pre-ACA individual insurance market is for people. And it may well be that this proposal, should the administration find a way to put it into effect without legislation, would address their political problem while doing minimal damage to the new marketplace. Let's hope so.

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