Obamacare Is Falling Apart Before Our Eyes: ObamaCare Madness, Christmas Edition

Published December 20, 2013

Weekly Standard

The wrecking ball swung again toward the crumbling Obamacare edifice yesterday. Ironically, it continues to be the Obama administration that is operating the heavy machinery.

Health and Human Services Secretary Kathleen Sebelius announced, in the form of a letter to Democratic senators, that Obamacare’s individual mandate tax will be waived in 2014 for persons who had their policies canceled in 2013 due to Obamacare.

At this point, after months of on-the-fly pronouncements, delays, and exemptions (often announced, not coincidentally, in the days just before a major national holiday), perhaps nothing should surprise us anymore about Obamacare’s disastrous rollout.  But yesterday’s announcement is still startling because of what it says about the state of the president’s signature domestic legislation. The law is falling apart before our eyes.

No doubt the administration’s defenders will argue that this is simply a tactical retreat, executed with surgical precision, and intended to protect the law from more serious legislative threats in 2014.  Better to give a little by executive action now than to invite an impossible-to-control revolt by Democrats in the Senate later, the thinking goes. And by orchestrating the tactical retreat in conjunction with political allies (the Sebelius letter followed by one day a letter requesting the change from six Senate Democrats), the administration is hoping its party will get credit with voters for “smoothing the transition” to Obamacare.

But by conceding that the individual mandate can and should be delayed for one group, the administration has opened a major can of worms.  For starters, this exemption is going to strike many Americans as blatantly unfair and arbitrary.  It comes at the 11th hour, after millions of people, including those with canceled plans, have already made their choices based on the rules they thought would be in effect.  The administration said for months that the mandate would not be waived for anyone, even those with canceled policies, and it vowed a veto of any delay legislation coming out of Congress. Now the rules have been changed, and some families who have committed to pay thousands of dollars in insurance premiums will feel very personally betrayed by an untrustworthy administration.

This exemption also further undermines the Obamacare exchanges, which are already teetering.  The administration claims that there are only 500,000 people with canceled policies who haven’t signed up for new coverage yet.  But this is an unverified number put out by the administration for damage control.  Insurance industry insiders believe that, come January 1, most carriers will be looking at lower net enrollment in their plans compared to the previous year, meaning that cancellations will exceed new Obamacare enrollment in private plans.  So the number of people with previous coverage who haven’t signed up with new coverage could easily be twice or three times the administration’s estimate.

In addition, what’s to stop those with canceled policies who fought their way through healthcare.gov from now changing their mind and dropping their plans in light of the administration’s announcement?  These families would need only to file a form indicating that the premiums they were facing in the exchanges are unaffordable. As matters stand, the administration would have no basis for denying an exemption to such households.

The upshot is that the administration has voluntarily opened another very big escape route out of Obamacare, and the most likely escapees will be young and healthy Americans who don’t want to pay high premiums for Obamacare’s expensive benefit plans. Even before yesterday it was clear that the risk pools in the exchanges were going to be unbalanced, with too little enrollment by the young and healthy relative to the old and sick.  Now, there’s more reason than ever to expect the exchanges to resemble slightly enlarged versions of high-risk pools that have been in existence for years in the states.

And then there are the other Americans who remain subject to the mandate, including the uninsured.  As Ezra Klein notes, what could possibly justify waiving the mandate for those who could afford to pay premiums in 2013 (for policies that were forced to be canceled by Obamacare) while retaining it for the uninsured who couldn’t afford coverage at all in 2013?  As it becomes more evident that there will be tens of millions of uninsured in 2014 despite Obamacare, Democrats will come under intense pressure to exempt them from the individual mandate tax too.  NBC’s Chuck Todd spoke for many when he wondered aloud whether anyone would pay the uninsured tax in 2014, given what has transpired to date.  Who would bet otherwise at this point?

The administration also announced yesterday that those with canceled policies could elect to enroll in the catastrophic insurance options offered on the Obamacare exchanges.  These were supposed to be reserved for enrollees age 30 and younger, and were priced accordingly.  Now the administration has opened up these policies, at least theoretically, to some people over age 30, which means the products are undoubtedly underpriced (as of now, the exchange websites only allow shoppers 30 and younger to see the catastrophic coverage options, and it’s not clear how fast this feature could be changed).  Of course, in the first three years, when the insurers lose money on Obamacare coverage, it’s the taxpayers who pick up the tab in the form of “risk-sharing” provisions.  But the insurers should not be complacent.  As these “bailout” features of Obamacare become more widely understood, they will not sit well with taxpayers, and therefore are politically vulnerable too.

The Obama administration has decided on its own to delay the individual mandate for one group of Americans.  GOP House and Senate members can rightly take partial credit for making this happen because they were the ones who turned up the political heat on Senate Democrats.  There’s a lesson there.  The Obama administration has been systematically dismantling its own law over the last year because it has feared the political backlash that would ensue if it didn’t conduct a partial retreat. The GOP should therefore keep the pressure on and see what other provisions of Obamacare the administration will throw overboard in a likely futile attempt to protect Democrats in the next election.

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