Enormous uncertainty now surrounds Obamacare, thanks to the health insurance policy “fix” President Obama announced today. Will the bulk of those who have received cancellation notices now be able to keep their policies for a year? Or will they still be out of luck, as state insurance commissions nix the plans in question or, alternatively, insurance companies do not revive them?
I don’t pretend to know the answer. For what it’s worth, I believe that Obama expects, and hopes for, less than widespread relief under his fix.
But either way, Obama and his party face huge risks. Let’s examine them.
Suppose the fix turns out to be just that; in other words, it enables the vast majority of those who want to keep their plan, but have had it cancelled, to get it back. In this scenario, the problem of adverse selection, i.e., not enough healthy people buying insurance in the exchanges, is exacerbated considerably.
Obama has granted relief for only one year. Perhaps one year of exacerbated adverse selection won’t be sufficient to throw Obamacare into a “death spiral.”. Still, Obama is running that risk.
Moreover, granting relief for only a year carries risks of its own. Panic will likely set in just as the 2014 election approaches. Obama may hope that, with the website finally up and running, folks will see good alternatives to their current plan by next November. But this seems unlikely, except for people who are receiving subsidies. The rest of those losing their current plan will be expected to pay for coverage they probably don’t want, and they won’t like it any more next year than they like it now.
Now, suppose the fix proves not to be a fix; in other words, huge numbers of people end up losing their current plan and not liking it. Obviously, in this scenario the president has failed to keep his oft-repeated promise, and discontent is just as widespead as it was earlier this week when congressional Democrats were in full panic mode.
Obama hopes that blame will be directed towards state insurance commissions and, especially, insurance companies. Some may be. But Obamacare will remain the “but for” cause of the cancellations — if the legislation hadn’t been enacted, the mass cancellations would not have occurred. And again, Obama’s promise will turn out to be a lie.
If this is a fair assessment of the main risks associated with the “fix,” where does this leave congressional Dems? It leaves them in a fix.
The potential death spiral scenario may not overly trouble those whose political future is up for grabs next year. It’s a hypothetical problem, and someone else’s, compared to the political risks associated with mass cancellations.
But the Dems can’t know at this point whether the fix actually will fix the mass cancellation problem. If in a month or two we find that it has not, a new wave of discontent will pour over them.
Nor can the Dems comfortably take a wait and see attitude. In the House, Republicans presumably will force an up-or-down vote on a stronger “keep your plan” proposal than what Obama has come up with. In the Senate, Democrats will be asked to support such legislation, which a number are on record as having said they would, at least absent a good fix by Obama.
If Democrats rally around Obama’s fix and it proves inadequate, they will be easy targets for a devastating attack.
How will things play out? Who knows? My guess is that the most vulnerable Dems will press for and/or support something stronger than the Obama fix. But their less vulnerable colleagues will fall into line, and the Obama fix will be sufficient to prevent Senate passage of a stronger alternative.
The most vulnerable Dems will have a fig leaf. The White House will be spared having to veto fix legislation.
After that, we will see which of the two Democrat-unfriendly scenarios prevails.