How Both Republican and Democratic States Are Helping Obama

Last week, President Obama announced a "fix" to the problem of people in the individual health-insurance market getting cancellation notices from their insurance companies: he'd allow the insurers to offer those substandard plans for another year. Does he want the fix to work? We can't read his mind, but depending on how you define "work," it would be better for the Affordable Care Act's ultimate success if it didn't.

As things have played out over the last few days, there are reasons that as a political problem this could fade.

As you may know, insurance markets are governed by officials in each state. If a state's insurance commissioner doesn't want to allow the substandard plans to be sold, he or she can say no, no matter what the President might want. A few of those insurance commissioners—from Vermont, Rhode Island, and Washington state—have already said they won't allow it. So what you have here are heavily Democratic states not supporting Obama. But here's the key to the story: those states also chose to run their own health exchanges, and all of them are working well.

We could end up with a situation in which the states that adopt Obama's fix are the ones most opposed to Obamacare, and the states that support Obamacare don't adopt it. And I wouldn't be surprised if that's just fine with Obama.

To see why, let's imagine two people, Joe and Mary. Joe lives in Rhode Island, Mary lives in Alabama. They both got letters from their insurance companies, telling them their policies will be cancelled and trying to sell them much more expensive policies. They were mad! Then President Obama said he'd let insurance companies sell the old policies. They were relieved! But then there was a lot of talk about these insurance exchanges, and Joe went to the Rhode Island exchange and found out he could get a more comprehensive policy for the same money, which he did. Mary tried Healthcare.gov, found it a hassle, and decided she'd stick with her old plan. And you know what neither one of them did? Called a reporter to complain.

Of course, that depends on the insurers offering the plans, and many of them may not. On the other hand, Healthcare.gov has gotten a lot better, even if it's still frustrating, so a lot of those people with cancellations will end up getting their new policies through it in the end.

Although the administration would be happier if no one kept their old substandard plan—they need as many people as possible to enter the new risk pool to keep premiums down—this may be the next best thing, at least from a political standpoint (and the "fix" was always a solution to a political problem, not a policy problem).

There's an (imperfect) analogy here, which is that the states most opposed to federal government intrusion into health care refused to create their own exchanges, leaving the job to the federal government. Had the feds done a great job of that, those states would have unwittingly helped the law succeed. But of course they didn't, which brings me to a little bit of rare pundit accountability. I said at various points over the last couple of years that if I were a resident of a state with Republican control like, say, Alabama, I'd feel much more optimistic about a federal exchange than a state exchange. After all, those Alabama Republicans, who hate the very idea of government regulation of the health-care market, would probably do a crappy job of creating the exchange, while at least the Obama administration was populated by people who wanted this to work and would therefore do a better job.

It turns out there were some factors, like the influence of the pathological federal procurement system, whose importance didn't become clear until things began to go south. Of course, we'll never know if Alabama or any of the other Republican states would have done a spectacular job with their own exchanges or not. The only red state that made its own fully functioning exchange is Kentucky, which has a Democratic governor.

If red-state Republicans were being Machiavellian, they'd refuse to allow the fix in their states, thereby forcing all their citizens on the individual market to go through Healthcare.gov, and if the site isn't improved fast enough, that could increase the political damage to the President. They're probably not that clever.

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