ObamaCare: Delay and Disarray

To listen to President Obama this week, the much touted, somewhat improved, access to Obamacare’s billion-dollar web site envisages the success of the Affordable Care Act.  Count us among the doubtful.

While somewhat more people can now enter the front end of the site and provide information to the government, there are major problems with the data that exits the back end of the site, which is sent to the insurers who are supposed to provide healthcare coverage. According to the Washington Post, the enrollment records for a significant portion of the Americans who have chosen health plans through the online federal insurance marketplace contain errors generated by the computer system that mean they might not get the coverage they’re expecting next month. And these are just the technical problems, which we presume, given another billion dollars (more or less), will eventually be solved.  Then the real problems begin.

A few weeks ago, the government determined that the online portion of the federal ObamaCare small business marketplace was no more ready for prime time then was the individual online marketplace, so the White House delayed the small business mandate for a year.  Actually, it was to be delayed until the middle of next October until someone at the White House realized that the mid-term elections would then follow the roll out by a couple of weeks.  What to do?  Simple.  The White House then determined that a year’s delay wouldn’t quite do the trick, so they adjusted the delay from twelve months to thirteen months, just long enough to get by the elections.  Who knows, maybe Lincoln was wrong and you can fool all of the people all of the time.

The House of Representatives Small Business Committee Chairman Sam Graves (R-Mo.) said it’s been apparent for months that the small business enrollment website wasn’t ready to launch.  “Based on the June GAO report on small business readiness, we knew the administration was not prepared for the implementation, but this pattern of continued delay and disarray is especially disappointing,” Graves said in a statement.

When, the now delayed, large and small business mandates do finally kick in employers will have to decide whether they will continue to provide health care coverage for their employees or send their people to the health care exchanges.  We know that many employer-provided health care plans simply will not meet the requirements of ObamaCare.  New plans (and new premiums) will, more often than not, be required.  Companies will be faced with the decision to pay the relatively modest penalty and cease providing insurance or temporarily eating the higher cost before passing it on to their customers to digest.  It is not apt to be a pretty picture.

As we have reported in past essays, businesses (especially small businesses) essentially have two defenses against rising premium costs for employer-provided healthcare coverage.  They can cease providing coverage and pay the relatively modest penalty, or many businesses, especially small businesses, can escape the ObamaCare mandate by recalibrating their employee hours to bring them below 50 hours a week for full time workers or beneath 30 hours a week for their part time workers.

According to an analysis by the conservative American Enterprise Institute, about half to two-thirds of small businesses will have policies canceled, or be compelled to send workers onto the ObamaCare exchanges. This is particularly significant for a narrow swath of small businesses who employee about 75% of the workforce.  It appears that as many as 100 million small and large business policies could be canceled next year.  Small wonder then that the Administration put off the effective date of the small and large business mandates until after the midterm election.

Some of the more savvy businesses got around their non-compliance problem by renewing their policies before the end of this year. But a year goes by pretty quickly, and we expect that around election time next year, businesses will have to decide whether they can afford to offer in-compliance plans beginning in 2015.  It seems unavoidable that beginning the 4^th quarter of next year millions of health insurance policy cancellation notices will start flooding the market.  Businesses will have to have new plans. Many, perhaps most, will have to be considerably more expensive. Not a great time to have an election…or, then again, maybe it is.

The International Franchise Association and the U.S. Chamber of Commerce (both of which primarily service small businesses) have canvassed their respective memberships and have determined that the President’s health care law has resulted in higher costs and fewer full-time positions.  They found that 31 percent of franchise businesses (and 12 percent of non-franchise businesses) have already reduced part-time worker hours. It also showed 27 percent of franchise businesses, and 12 percent of non-franchise businesses, have replaced full-time workers with part-time employees.

The disarray has been astonishing.   When the government’s rollout of ObamaCare collapsed, the White House had little choice but to announce a legally dubious administrative fix that allows insurers to renew existing policies that do not comply with the over-reaching 2014 ObamaCare rules.  Again, an avalanche of unintended, but highly predictable, consequences will arise.

Enabling people to keep pre-2014 coverage will result in healthier people with low cost plans (because they are healthy) remaining in the old market, while sicker people who may not have been able to get coverage in the past run to the exchanges.  This is the one circumstance that the Administration has been desperate to avoid, because the exchanges will be burdened with high-cost enrollees in the absence of low cost premium payers subsidizing the system.

The problem is further compounded because insurers have set their premiums on the assumption that the old non-qualifying plans would be cancelled, as the law required, thereby bringing a substantial number of young healthy people into the new ObamaCare market.  Now they are stuck with rates that more than likely won’t come close to covering the costs imposed by the older (sicker) enrollees that they now must accept.   The Insurers only defense against a disastrous outcome may be to exit the ObamaCare exchanges.

So then what?  Well, the fewer companies offering plans, the fewer choices people will have.  Furthermore, as premiums rise (as they will) the cost of the subsidies the government is obligated to provide for lower income individuals will, of course, escalate.

A recent study by the Manhattan Institute found that premiums were going to increase by an average 41% in the states they studied, with the greatest increases hitting the young and the healthy. The Institute’s analysis also found (not surprisingly) that the primary beneficiaries of the federal subsidies would be those about to retire, i.e. sicker individuals, and those previously without insurance.  The subsidies are going to be considerably more expensive for the government than anyone anticipated.

The White House will complain mightily about the premium increases that are on the way.  For example, the Sacramento Bee reports that as many as 600,000 Californians in the individual market are apt to see premium increases ranging from 5% to 50%.  California, the reader will recall, is the state the President likes to point to as proof that ObamaCare works.  But the complaining will be disingenuous because the Administration knew this was going to happen.  Notes that CNN obtained from a meeting of the administration’s Obamacare War Room stated that there will be, in various states, fewer options than would be desired to promote consumer choice, and that various states will also be subjected to relatively high cost plans.

Quite predictably ObamaCare is in a state of delay and disarray.  No one should be surprised.