Obama Turns On Insurance Allies

If you like your health insurance, you really can keep it. If you can’t, blame your insurance company – not the president.

So says the man whose name is indelibly etched on the snafu known as Obamacare.

While his fellow Democrats ran for political cover yesterday, President Obama turned on the health insurers who have been his more-or-less willing accomplices in remaking the health care delivery system. As directed by the president’s signature policy initiative, insurers are pulling the plug on millions of individual insurance policies that do not offer the mix of benefits that becomes mandatory on Jan. 1. But the president has now reversed course, going on television to tell angry consumers that insurers are free to continue selling what his administration has described as “substandard” policies to those who want to buy them.

But only sort of free, and only for one year, with conditions, and subject to approval by state insurance commissioners (who, conveniently, become another party not named Obama who can serve as a target for consumer anger). What the White House calls an “administrative fix” probably comes too late to make much difference – but if that’s the case, then Americans are supposed to blame insurers for not somehow foreseeing that the president, who for three years has fought every attempt by critics to delay or repeal the law, would decide at the last second to postpone one of its central mandates.

Come to think of it, blaming insurers is not entirely wrong, because in some respects the industry should blame itself for becoming the president’s latest campaign target.

Tempted by the lure of selling government-subsidized benefits to tens of millions of new customers, the insurance industry provided crucial support when the Affordable Care Act was drafted in 2010. It is no coincidence that Quality Software Services Inc., a subsidiary of UnitedHealthcare – the nation’s largest health insurer – was hired last month to coordinate the rescue effort for the federal insurance exchange that is serving, or mostly disserving, consumers in 36 states. The industry has a huge vested interest in making Obamacare succeed.

It is also not coincidence that Obama chose to make his about-face announcement yesterday. Today, the House of Representatives is scheduled to vote on a measure by Rep. Fred Upton (R-Ohio), which he calls the “Keep Your Health Plan Act of 2013.” The president wants to forestall a surge of Democratic support for Upton’s bill, which would similarly allow insurers to offer otherwise non-qualifying plans to individual consumers through 2014.

Why did Obama hasten to pre-empt the House bill by declaring, without any obvious legal authority, that insurers are free to ignore the ACA mandates for a year? It was likely, in part, a move to deprive Republicans of a chance to say they forced a change in the president’s favorite statute. A bigger motive may have been the desire to avoid embarrassment resulting from members of the president’s own party abandoning him on this highly visible issue.

But the largest motivation, I suspect, is that there are significant differences between Obama’s new policy and Upton’s bill. Obama would only let insurers continue selling nonconforming policies to people who already have them; Upton’s legislation would keep such plans available next year to anyone who wants to buy them. Since many of those plans offer lower premiums, Upton’s approach increases the threat that healthy consumers will shun plans offered on the ACA exchanges, making it likely that insurers will jack up next year’s rates to cover the sicker, older population the exchanges will attract. Next year’s rates will be announced right before the 2014 congressional elections.

Obama also wants to force insurers to notify would-be purchasers of non-conforming policies that other options may be available on the exchanges, along with subsidies to help pay for premiums. Upton’s bill does not force insurers to carry the administration’s ACA sales pitch.

Just as with Obama’s about-face, Upton’s bill may not have arrived in time to make any practical difference. It takes months for insurers to price products, win state approval to market them, and get them in consumers’ hands. It also costs money to maintain each plan’s network of physicians, hospitals and other health providers. After 38 months of preparing for a law that made many older policies unmarketable after 2013, insurers will be hard-pressed to revive such plans in the six weeks remaining before the end of the year, even if they want to go to the trouble for just one more year of sales. And if they do want to revive the old plans, pricing will be difficult or impossible, since not everyone who previously held them is going to accept the invitation to sign up again. Will the group that actually returns to the old plans be older or younger, sicker or healthier, than the population that has just received cancellation notices? It is a crucial question for insurers, and one they have inadequate time to consider.

My guess is that many will simply pass on reviving the old policies. Obama surely knows this; he is simply looking to provide political cover for Democrats who are up for re-election next year, by allowing them to blame insurers for dropping health plans that a Democrat-controlled Congress outlawed when it passed the ACA without any GOP votes.

What happens when and if an insurer actually allows consumers to sign back up for an old plan that was slated for the scrap heap? The president’s policy (like Upton’s bill) only allows those plans to be sold for one more year – at which point the famous “you can keep it” promise will presumably become inoperative again. Upton and his Republican colleagues never made such a promise. They just promised to do everything possible to repeal Obamacare, which would, for good or ill, put us back where we were in 2010 until something gets passed to replace it.

Give the president and his party high marks for consistency, in any case. For generally laudable reasons, but with highly questionable economic logic, they passed a hastily-cobbled-together, ill-thought-out law to remake the entire health insurance system while overriding the views of roughly half the country. Now that their Rube Goldberg device is dropping parts like an old jalopy, they are looking to an equally hastily-cobbled-together quick fix to get themselves out of the political deep water in which they find themselves. The problem is that they are swimming in a pool that has no shallow end.

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About Larry M. Elkin 564 Articles

Affiliation: Palisades Hudson Financial Group

Larry M. Elkin, CPA, CFP®, has provided personal financial and tax counseling to a sophisticated client base since 1986. After six years with Arthur Andersen, where he was a senior manager for personal financial planning and family wealth planning, he founded his own firm in Hastings on Hudson, New York in 1992. That firm grew steadily and became the Palisades Hudson organization, which moved to Scarsdale, New York in 2002. The firm expanded to Fort Lauderdale, Florida, in 2005, and to Atlanta, Georgia, in 2008.

Larry received his B.A. in journalism from the University of Montana in 1978, and his M.B.A. in accounting from New York University in 1986. Larry was a reporter and editor for The Associated Press from 1978 to 1986. He covered government, business and legal affairs for the wire service, with assignments in Helena, Montana; Albany, New York; Washington, D.C.; and New York City’s federal courts in Brooklyn and Manhattan.

Larry established the organization’s investment advisory business, which now manages more than $800 million, in 1997. As president of Palisades Hudson, Larry maintains individual professional relationships with many of the firm’s clients, who reside in more than 25 states from Maine to California as well as in several foreign countries. He is the author of Financial Self-Defense for Unmarried Couples (Currency Doubleday, 1995), which was the first comprehensive financial planning guide for unmarried couples. He also is the editor and publisher of Sentinel, a quarterly newsletter on personal financial planning.

Larry has written many Sentinel articles, including several that anticipated future events. In “The Economic Case Against Tobacco Stocks” (February 1995), he forecast that litigation losses would eventually undermine cigarette manufacturers’ financial position. He concluded in “Is This the Beginning Of The End?” (May 1998) that there was a better-than-even chance that estate taxes would be repealed by 2010, three years before Congress enacted legislation to repeal the tax in 2010. In “IRS Takes A Shot At Split-Dollar Life” (June 1996), Larry predicted that the IRS would be able to treat split dollar arrangements as below-market loans, which came to pass with new rules issued by the Service in 2001 and 2002.

More recently, Larry has addressed the causes and consequences of the “Panic of 2008″ in his Sentinel articles. In “Have We Learned Our Lending Lesson At Last” (October 2007) and “Mortgage Lending Lessons Remain Unlearned” (October 2008), Larry questioned whether or not America has learned any lessons from the savings and loan crisis of the 1980s. In addition, he offered some practical changes that should have been made to amend the situation. In “Take Advantage Of The Panic Of 2008” (January 2009), Larry offered ways to capitalize on the wealth of opportunity that the panic presented.

Larry served as president of the Estate Planning Council of New York City, Inc., in 2005-2006. In 2009 the Council presented Larry with its first-ever Lifetime Achievement Award, citing his service to the organization and “his tireless efforts in promoting our industry by word and by personal example as a consummate estate planning professional.” He is regularly interviewed by national and regional publications, and has made nearly 100 radio and television appearances.

Visit: Palisades Hudson

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