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Obamacare Excuses

by Avik Roy

Refuted, one by one

‘If you like your health-care plan, you’ll be able to keep your health-care plan, period. No one will take it away, no matter what.” It surprised no one — at least no one who closely followed the passage of Obamacare — that the president’s iron-clad guarantee was more like tinfoil. But the president’s problems with the law, already serious, are going to grow deeper.

In the Nixon days they used to say that “the cover-up is worse than the crime.” So, too, are the excuses Mr. Obama is making for health-insurance cancellations: Over the course of explaining away the first fabrication, the president has uttered four more that will come back to haunt him.

It was an accident, I swear. At a mid-November press conference, President Obama issued an explanation for the gulf between his promise and the millions of cancellation letters that Americans are receiving from their health insurers: “There is no doubt that the way I put that forward unequivocally ended up not being accurate. It was not because of my intention not to deliver on that commitment and that promise. We put a grandfather clause into the law, but it was insufficient.” While he genuinely intended to keep his promise that all Americans could keep their plans, the president now claims, he was foiled by some sort of regulatory mix-up.

This is poppycock. Obamacare was never intended to allow Americans to keep their plans if they liked them — it was intended to allow people to keep their plans if President Obama liked them. Title I of the Affordable Care Act imposes a blizzard of new federal regulations on the private health-insurance market, which most drastically transform the market for insurance plans that people purchase directly, the “individual” or “non-group” market.

These new regulations include the key requirement that plans not only insure everyone regardless of preexisting conditions, but also charge everyone the same price irrespective of health status. They force healthy and young people to pay a lot more for plans than they cost to insure, in order to partially subsidize the cost of insuring others.

In other words, not only does Obamacare not necessarily let you keep your plan in the individual market, but its very success hinges on forcing many people out of their plans.

Section 1251 of the health-care law does assert that “nothing in this Act . . . shall be construed to require that an individual terminate coverage under [a plan] in which such individual was enrolled on the date of enactment of this Act.” But, as the Obama administration explained a few months later in the Federal Register, every insurance plan makes some minor changes from year to year, as the health-care system evolves. For example, if a major branded drug goes off-patent, an insurer is likely to tweak its co-pay structure to encourage patients to use the generic version of the drug. The administration decided that most of these tweaks would strip a plan of its grandfather status. Some regulatory language on changes to such plans would have been necessary in any case, so that they couldn’t be altered beyond recognition, but the administration could have given insurers much broader room than it ended up doing.

As a result, federal agencies predicted in 2010 that “a reasonable range for the percentage of individual policies that would . . . relinquish their grandfather status is 40 percent to 67 percent.” In other words, the administration has known for over three years that the grandfather clause wouldn’t apply to most individually purchased coverage. And yet, as recently as this September, the president was still promising Americans could keep their plans.

We’re talking about 5 percent of the population. The president’s next go-to excuse is that the cancellations aren’t a big deal because they’ll hit only about 5 percent of the population. This is an inadequate defense on two fronts. First of all, “5 percent” of the American population refers to a group of 13 million people; by way of comparison, it’s estimated that we have 11 million illegal immigrants in the United States. The status of the illegal-immigrant problem is a crisis regarding urgent attention, according to the president, but 13 million citizens’ losing the plans they like is no big deal.

More important, the true share of Americans affected is much larger than 5 percent. In the same Federal Register report discussed above, the Obama administration predicted as a “mid-range estimate” that 51 percent of all employer-sponsored health plans would lose their grandfather status by the end of 2013. The problem would affect small-employer plans (66 percent) more significantly than large-employer ones (45 percent). That adds up to 80 million Americans with employer-sponsored coverage whose old plans will now be illegal, on top of the millions whose individual coverage will end.

Obamacare’s disruption to the employer-sponsored market won’t be as severe as that to the individual market, because the employer-sponsored market is already heavily regulated. Most employers will choose to continue to offer coverage to their workers, and their employees, unlike individual customers, bear only part of the costs of such plans. But the new, Obamacare-compliant plans will be substantially more expensive — 15 to 25 percent more, on average, according to insurance executives — than the pre-Obamacare ones.

This is why Delta Air Lines wrote a letter to the Obama administration reporting that they will be spending $100 million more on health coverage in 2014 than they did in 2013, a difference that, for the most part, is driven by Obamacare. At the AFL-CIO quadrennial convention, unions passed a resolution declaring that Obamacare “will drive the costs of collectively bargained, union administered plans, and other plans that cover unionized workers, to unsupportable levels.”

The canceled plans were “substandard.” The president has also tried to argue that, yes, it’s not true that you can keep your plan, and yes, it’s not true that only 5 percent of Americans can’t keep theirs, but none of this matters, because the old plans weren’t good enough. Obamacare serves to protect consumers from these “substandard” plans — you should be glad your old plan is now illegal.

But this isn’t true. If you already have insurance, you don’t benefit from a provision that forces insurers to cover everyone regardless of preexisting conditions. That provision doesn’t benefit most people; there are fewer than 1 million Americans with whom insurers won’t do business because of their health status. And if you’re reasonably healthy, you don’t benefit from Obamacare’s rule forcing insurers to charge the healthy the same prices as the sick. And regardless of the state of your health today, Obamacare imposes a laundry list of taxes and fees on your insurance plan that doesn’t do anything to make it better — just costlier.

In fact, it’s the new plans under Obamacare that can rightly be called “substandard.” Plans sold on Obamacare’s exchanges tend to narrowly limit your choice of doctors. They have higher deductibles. In a free market for health insurance, people might choose such plans because they would come with lower premiums. But under Obamacare, these plans come with higher premiums. In other words, Obamacare forces millions of Americans to pay more for health insurance that covers less than their old plans did.

Furthermore, if we’re going to start talking about “substandard” insurance, the discussion ought to begin with Medicaid, the industrialized world’s worst health-insurance program. Earlier this year, in a study published in the New England Journal of Medicine, Medicaid was found not to result in better physical-health outcomes than having no insurance at all. That’s in part because the program pays providers so little that an increasing number of doctors refuse to accept Medicaid patients.

Given the president’s opposition to “substandard” insurance, you’d think he’d want to move poor people off Medicaid and onto higher-quality private insurance. But no. Obamacare substantially expands the Medicaid program; indeed, the law depends on Medicaid to provide half of the new coverage that it extends to the uninsured. So far almost 80 percent of the law’s new insurance enrollees have been in the program.   

Better care at the same cost or cheaper. The biggest lie of all is the law’s official name: the Patient Protection and Affordable Care Act. Its trillions of dollars of insurance subsidies will make health insurance cheaper for some individuals, whose income is near the poverty line. But everyone else will pay more, or get less, or both.  

The law raises taxes by $1.2 trillion, and cuts planned Medicare spending by $716 billion, in order to spend $1.9 trillion on the uninsured — and it still makes insurance more expensive.

A study I helped conduct for the Manhattan Institute found that the average state will see underlying individual-market premiums go up by 41 percent. And that’s the average — healthier and younger people, especially men, will see much steeper increases.

Conservatives’ main objection to Obamacare has been ideological: The law expands the role of the state; it is likely to increase the federal debt; it violates the Constitution. All of these arguments preach to the converted. Where the law will finally founder is on its own terms: the broken promise that it would make health coverage more affordable for every American.

– Mr. Roy is a senior fellow at the Manhattan Institute and the author of How Medicaid Fails the Poor.

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