Every time one of the warnings voiced by Obamacare’s critics before the law was enacted has come true, the law’s most eager champions (i.e. the political press) have seemed deeply surprised. It’s almost as if they just weren’t listening, isn’t it?
Federal and state officials and consumer advocates have grown worried that companies with relatively young, healthy employees may opt out of the regular health insurance market to avoid the minimum coverage standards in President Obama’s sweeping law, a move that could drive up costs for workers at other companies.
It seems that employers with huge amounts of money at stake have discovered that self-insured companies are not subject to many of Obamacare’s requirements, and oddly they have reacted not with indignation at such a regulatory oversight but rather by moving to self-insure. By creating this powerful incentive, Obamacare threatens to draw employers (even quite small ones) with healthy workforces out of the insurance pool fully regulated by the new law, leaving that pool less healthy and therefore leaving it with greater costs. In fact, Obamacare itself actually makes the switch to self-insurance less risky for employers by making it easier to switch back if necessary. As the Times puts it:
The new law reduces the risks of self-insurance. Previously, self-insured companies would have struggled to switch to the insured market if employees developed costly illnesses. Under the law, companies can switch with no penalty, as insurers generally “must accept every employer and individual” who applies for coverage.
Like most of the law’s most significant effects on economic incentives, this wasn’t actually done on purpose. It’s a function of the same attitude on display in the Times article: a view of economic actors as drones awaiting instructions rather than reasonable people considering their options. And so of course, the solution is to take away options. The Times’s description of the administration’s thinking is priceless:
The Obama administration is investigating the use of stop-loss insurance by employers with healthier employees, and officials said they were considering regulations to discourage small and midsize employers from using such arrangements to circumvent the new health care law. “This practice, if widespread, could worsen the risk pool and increase premiums in the fully insured small group market,” the administration said in a notice in the Federal Register.
How exactly the existence of a design flaw in the law somehow empowers the administration to fix it by “discouraging” self-insurance through regulation is so quaint and naïve a question as to not even merit mention—a vestige of our barbarous past.
Meanwhile, over the weekend we learned of another surprise. It seems that the temporary program created by Obamacare to provide coverage to people with pre-existing conditions until the new system takes effect next year has run out of money even though it attracted far fewer people than it was expected to. The Associated Press described the matter in terms we’ll be getting used to as Obamacare unfolds:
Enrollment around the country has been lower than expected, partly because some people could not afford the premiums. But individual cases have turned out to be costlier than originally projected.
The arrangement is loosely modeled on an approach that actually has helped people with pre-existing conditions in some states: the high-risk pool. But as Jim Capretta and Tom Miller (among many critics) noted back in 2010, it was cobbled together in haste and involved rules and requirements that plainly guaranteed its failure.
We’ll be getting used to hearing a lot of that too. In fact, in response to the program’s bankruptcy, Gary Cohen (the director of the Center for Consumer Information and Insurance Oversight at HHS) offered the Washington Post a statement that seems likely to stand as the unofficial motto of Obamacare as the law is rolled out in the coming years: “What we’ve learned through the course of this program is that this is really not a sensible way for the health-care system to be run.”
Better late than never. But not much better.