Individual/Family Health

Although I’ve seen a lot of media references placing blame for the government shutdown squarely at the feet of House Republicans, I’ve also heard people saying that both sides are to blame and that the Democrats could have “compromised.”  I’ve just finished reading the text of the House amendment to H.J. Res. 59.  This is the amendment that would have “delayed Obamacare” by a year.

There are a couple specific aspects of the ACA that House Republicans were trying to delay or delete.  The most significant is the individual mandate (keep in mind that this has been challenged all the way to the Supreme Court and found to be Constitutional), which the amendment would postpone until 2015.   [The amendment also contains some other provisions regarding health insurance for Congress and the President, which I’ll address tomorrow.]

The initial provisions of the ACA started to take effect in 2010.  January 1, 2014 is about 3.5 years after that, so the individual mandate had a significant built-in delay.  But let’s assume for a moment that the Democrats wanted to accept this “compromise” and allow the individual mandate to be delayed until 2015.  What would that have involved from a practical standpoint?

An actuarial nightmare

Back in the spring of this year, health insurance carriers all across the country were scrambling to submit rates and plan designs for review.  There were some delays, and some carriers ended up having to redo their rates and submit them again, but by the middle of August we had a pretty good idea of what plans were going to be available in the Colorado marketplace (exchange) – and news was also coming in from lots of other states.  This was six weeks before the marketplaces opened, and a full 4.5 months before the new policies were going to be effective.  Once the rates were finalized, they had to be loaded into each marketplace’s online quoting software so that they would be available to navigators, brokers and applicants once the marketplace opened for business.

This whole process took many months.  Creating the ACA-compliant plan designs and doing the actuarial work to price them was not something that happened overnight.  Carriers were working on this early in the year, getting their plan design and rate info ready to submit in the spring.  And then the rate reviews, final approval, and user interface updates added to the time frame.

So let’s go back and look at the Republican “compromise” of delaying the individual mandate for a year.  All of the new plans and rates that actuaries, marketplaces and Divisions of Insurance have been working with this year are designed around the basic concepts of the ACA:  Policies must be guaranteed issue (a huge change from the way policies have historically been issued in the individual market, where underwriting has been part of the process in all but five states), they can only be issued during open enrollment or following a qualifying event (loss of other coverage, birth, adoption, marriage, divorce), and the individual mandate is expected to generally increase enrollment.

Removing any of these elements would drastically change the pricing of the policies and basically mean that the actuaries would have to start over.  Incidentally, the House Amendment does not mention delaying the requirement that individual health insurance be guaranteed issue starting in 2014.  To roll out guaranteed issue coverage without the individual mandate would mean that rates would be significantly higher for the people who do opt to purchase a plan.  But regardless, removing one of the primary elements upon which the 2014 rates have been based would mean a complete do-over of the actuarial process of pricing the new policies.

But what about just keeping things the way they are?  Can’t we just keep our 2013 plans and roll them into 2014 with no changes?

No.  Remember, the House Amendment to “delay Obamacare” (that’s the language most often used in the media and by lawmakers themselves) would actually just delay the individual mandate.  It doesn’t delay the other crucial aspects of the ACA that guided plan design for 2014.  So policies would still have to provide essential health benefits.  They would have to be guaranteed issue and priced the same regardless of gender (in Colorado, this has been the rule for almost three years now, but the ACA bans it everywhere).

So current 2013 policies could not continue to be issued in 2014.  They’re not compliant in terms of plan design, even if actuaries were able to perform a miracle and redo all of the pricing in the next few weeks.

That puts us back to starting over with the new ACA-compliant plans that carriers created months ago, and trying to reprice them for 2014 to reflect a delay in the individual mandate.  Remember that the actuaries have to come up with the pricing (not a quick process), DOIs and marketplaces have to review the pricing, and then the final rates have to be uploaded to quoting systems (both marketplace systems and private “off-exchange” quoting systems) and added to printed sales materials in time for consumers to be able to use them.  For 2014 plans, this process started early in 2013.  Starting over at the beginning of October would have been mission impossible.

Consumers have generally always been able to submit applications one to two months prior to the effective date they want.  A lot of people wait until the last minute, but quotes are available several weeks out.  That means that if actuaries were to start over at the beginning of October and redo everything, the entire process would have to be completed by mid November at the latest in order for accurate pricing information to be available for consumers looking for a January 1 effective date.  The House Amendment did not mention delaying the opening of the marketplaces, so it’s unclear what lawmakers wanted the marketplaces to do.  Would plan information still be available in early October, but with no rate data?

To say that this was a poorly planned amendment is an understatement.  It was political posturing designed to appeal only to people who “hate Obamacare” (and unfortunately, some of those people are woefully uninformed about the law).  It had no basis in actuarial reality, and would have thrown […]