Manias, Panics and ObamaCare Crashes

A reader’s guide to the coming Affordable Care Act traumas.
President Obama says not to worry about the Affordable Care Act’s botched rollout because the country will love it once the website is fixed and subsidies start rolling. But what if the troubles are only beginning because they’re built into the law? In the tradition of service journalism, we thought we’d offer a reader’s guide to the many potential ObamaCare traumas to come.

Technology woes beyond Dec. 1. President Obama has promised for weeks that the 36 federal exchanges and the Healthcare.gov website will work for “the vast majority of users” by the end of November. But he’s refused to say how he defines success.

Press leaks suggest that the White House goal is for four of five people who want to sign up for insurance to be able to do so, including via a call center or paper application. Yet even that 20% error rate may be overpromising. Health and Human Services deputy Henry Chao told a House hearing this week that about 30% to 40% of the information technology that supports enrollment—such as the “back end” systems that send out monthly subsidies—still needs to be built.

All of which suggests that the Dec. 1 deadline is political, not a reflection of the repair team’s progress. The White House had to say things would work by then to pre-empt a Democratic mutiny and because people whose insurance has been terminated must register by Dec. 15 for a new plan by the New Year.

More cancelled health plans. Millions and perhaps tens of millions more Americans will lose their coverage, despite the White House’s one-year suspension of the mandates that force insurers to liquidate their old products. The problem is backloaded.

The wave would have been worse if not for a loophole that allowed early renewals: If people renewed their 2013 plans early, they could keep them in 2014 without complying with the mandates. Some 42 states allowed this loophole, but it only lasts through next November.

Small business insurance disruption. Thus far the cancellations have been largely contained in the individual market but will soon spread to small businesses. Companies with 50 employers or fewer were more likely to choose or to qualify for locking in their old benefits. They’re next on the cancellation block when the dispensation runs out.

The fear that businesses will dump their workers onto the exchanges remains, given the law’s strong incentives to do so. But the exchanges are so dysfunctional that this outcome is unlikely soon. Taxpayers are being saved for now by White House incompetence.

The viability of the exchanges. The enrollment period is supposed to end in March, assuming the window is not extended or the individual mandate is not delayed by Congress or executive fiat. Then we’ll learn how many people wanted or were able to sign up and if they represent the cross-section of health risks, ages and incomes on which the financial viability of the exchanges depends.

The early signs are not good. Insurers privately admit that enrollment thus far is too low and the mix skews toward high-cost beneficiaries whose premiums won’t cover their care. The enrollment figures from the first month comport with no known industry standard, and only about a third of applicants qualified for subsidies.

This suggests they’re older people with more income but also more expensive chronic conditions. Many of them will be people who had their old plans terminated, not the new uninsured consumers the health industry is after.

Rate shock round two. Most insurers thought they could break even on the exchanges, but that outlook has soured to losses of 3% to 5% with a 5% to 10% downside over the long term. Also in February and March, the insurers will start the months-long process of repricing their premiums for 2015, on the basis of what they learned this year.

The insurers will try to pass along the higher costs of the failed launch in the next year’s rates. The consumers who were forced to buy more expensive ObamaCare-compliant insurance this cycle will be exposed to another big price spike.

You can’t even keep your ObamaCare plan. The White House and regulators will lean on insurers to block these price hikes, but they can’t deny reality forever. Companies accountable to shareholders will flee unprofitable states as some are already doing, leading to even fewer options. New Hampshire already has just one for the entire state.

. . . or your Medicare Advantage plan. The Affordable Care Act’s deep cuts to the popular private insurance alternative to traditional fee-for-service Medicare are starting to burn, and seniors are starting to see higher premiums, reduced benefits and fewer choices. The steepest funding cliff arrives for the 2015 plans that will start to be sold in September.

And maybe not your doctor. The exchanges don’t offer what most people expect from normal commercial insurance and instead feature tighter administrative oversight of smaller groups of physicians akin to Medicaid. Clinton-era HMO-style plans are coming back, and doctor-patient relationships will be the next political casualty.

In the 1990s Americans rebelled against cost containment pressure, such as the “drive through” rules that told women to leave hospitals a day after giving birth. As beneficiaries seek care, they’ll find they can’t visit their family physicians without huge out-of-network markups, or can’t get certain procedures without prior authorization. Such methods are the only way to keep premiums affordable amid ObamaCare’s costly benefit mandates.

Physician dissatisfaction. U.S. medicine is under major financial strain, but not because the government is paying for quality instead of volume as liberals claim. The fee-for-service status quo is largely intact and reimbursement is merely being squeezed down. Exchange insurance with Medicaid-style networks pays Medicaid rates, while ObamaCare’s Medicare cuts are also sending that program’s price controls to Medicaid levels.

These rates are already so low that many doctors won’t take new government patients. Look for many doctors to start to conclude they will make a better living—and have more autonomy—by opting out. Providers participating in federal programs are subject to onerous quality-reporting rules, even if the metrics don’t accurately measure quality. The Affordable Care Act treats health professionals like robots on a factory line who can be reprogrammed to execute federal work orders.

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Our guess is that President Obama will try to power through all of this the way he always has: Blame others, stretch or break the law to plug the holes, squeeze insurers and try to keep Democrats from breaking ranks before the 2014 election. Perhaps it will work. But if the disruption spreads, and complaints multiply, don’t be surprised if Democrats force the White House to reopen the law.

Published in the Wall Street journal – 11/23/2013