Propping Up Obamacare: Playing the (Bad) Hand You’re Dealt…

Caduceus with First-aid Kit --- Image by © Royalty-Free/Corbis

Caduceus with First-aid Kit — Image by © Royalty-Free/Corbis

Obamacare is enrolling too many sick people and too few healthy ones to prevent a death spiral. The Centers for Medicare & Medicaid Services (CMS), a unit of the U.S. Department of Health & Human Services (HHS), has proposed a new rule to stabilize the Obamacare markets for individual health insurance. This was the first rule issued since Dr. Tom Price was appointed HHS secretary. The proposed Market Stabilization rule includes a number of measures to prevent people from entering the market when sick and exiting when healthy.

There is an urgent need for immediate action. It is increasingly likely that many Americans who have been forced to get coverage in the exchanges will have one or zero health plans in 2018. Insurers are unwilling to continue losing money in the exchanges. The proposed rule cannot rescue Obamacare, but it can buy some time for Americans who are suffering from dwindling choices in the exchanges.

The proposed rule addresses the Obamacare death spiral through a number of fixes in the areas of open enrollment period, special enrollment period, nonpayment of premiums, network adequacy and actuarial value. Specifically, the proposed rule would:

  • Reduce the annual open enrollment period from 60 days to 45 days.
  • Tighten the rules for special enrollment by requiring timely verification of qualifying events, such as marriage, change of employment or a long-distance move.
  • Replace the three-month grace period for nonpayment of premiums with a 12-month look-back to prevent people from gaming the system.
  • Allow insurers to reduce the number of “essential community providers” included in their networks from 30 percent to 20 percent.
  • Broaden the range of actuarial values insurers must cover based on projected costs.

While the rule moves in the right direction, CMS should consider strengthening it with the following changes:

  • Reduce open enrollment to 29 days, as in the Federal Employee Benefits Health Program.
  • Require continuous coverage with no gap longer than 30 days for special enrollment periods when people change jobs or marry, as in the employer-based market.
  • Require state-based exchanges to enforce the same regulations on special enrollment as Federally Facilitated Marketplaces (that is,
  • Clarify the exact legal basis in the Affordable Care Act for requiring enrollees who are delinquent in their premium payments to pay up to 12 months of overdue premiums before being enrolled in the next year’s plan.
  • Limit the Secretary’s authority over network adequacy to ensuring that health plans adhere to standards established by the states.
  • Recognize that minor changes to actuarial value (AV) standards cannot change the fundamental problem of AV as defined by the ACA.

The proposed Market Stabilization rule is an improvement over the previous administration’s ACA regulations. Further rulemaking is to be expected; however, it is not possible to fix Obamacare by rulemaking alone. New legislation is required.

Source: John R. Graham, “The Trump Administration’s Attempt to Slow Obamacare’s Collapse Through Rulemeking,” NCPA Policy Report No. 390, Thursday, March 30, 2017.

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Comments (26)

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  1. Bob Hertz says:

    I am interested in that proposed 29 day open enrollment period.

    As an agency manager who actually enrolls people, I would not make the period so short.

    Federal employees are computer literate, they have computers, and have been getting health insurance for years. Plus they can pay their share of the premium with ease through payroll deduction.

    The ACA enrollees are shall we say, not so favored.

    Yes there must be a few people who get sick during the longer enrollment periods and therefore jump in at the last minute.

    So a 29 day period would keep them out.

    I think it would also keep out many thousands more healthy people, who would then be uninsured all year.

    • Barry Carol says:

      I think 45 days is a reasonable renewal time period for non-ESI coverage.

    • Devon Herrick says:

      I wondered about that too. My fear about reducing open enrollment to 29 days is that the people who would try the hardest to enroll are those who are the sickest. The healthy folks may just forget about it if it’s difficult.

      However, I do like the idea that people who try to enroll during special enrollment periods must have continuation coverage or they face some penalty.

      • Barry Carol says:

        The penalty for not having continuous coverage should be stiff. Instead of the measly 30% penalty for one year as proposed in the AHCA, I think a 50% penalty five years would be more appropriate and effective. There could be exception provisions related mainly to unaffordability with robust income verification to prove that.

        • Devon Herrick says:

          Why not just underwrite people who don’t have continuation coverage?

          • Z Woof says:

            Devon, so you want people to have low quality HMOs with skinny medical provider networks until they get cancer and then let them switch to high quality PPO insurance so they can use the best medical providers?

            Won’t work to let people switch insurance companies after they have a head full of brain tumors.

            The best thought out schemes by you PHDs NEVER work.

            US self employed people in the land of the FREE will be able to enroll all year long, MARK MY WORD!

          • Bart I says:

            Good point. Creditable coverage would have to be from a compliant plan, either ACA or a non-underwritten group plan.

            If a tax credit could be designed to accurately offset the implicit tax (i.e. anything above the actuarially-accurate premium), and only non-underwritten compliant plans qualified for the tax credit, then it might be possible allow movement between underwritten and compliant plans.

            • Bart I says:

              There might still need to be a requirement that the previous plan has equal or greater value.

              • Bart I says:

                …but this goes for any plan-switching if no underwriting is involved.

                • Lee Benham says:

                  There will never be an enforceable penalty. We are talking about private insurance companies not government Medicare . If a new company wants to form and sell insurance. They will not penalize people who did not have coverage. They will underwrite and go after the healthy clients of the existing companies. Compatition will make it unprofitable to charge more premiums for not having continues coverage.

        • Bart I says:

          If you can flat-out deny entry to people who flunk underwriting, then there’s no need for a penalty. That _is_ the penalty.

          Otherwise it’s probably better to penalize everyone who joins late, and underwriting serves no purpose.

      • Bart I says:

        Isn’t the Medicare penalty something like 10%-for-life for every year you delay entry beyond eligibility?

        • Barry Carol says:

          Yes, I think it’s 1% for each month that you delay signing up for Part B and for Part D. People with at least 40 quarters of Social Security credits are automatically eligible for Part A upon turning age 65 or two years after being declared eligible for Social Security Disability coverage. The penalty does indeed last for life. My proposal is actually relatively lenient compared to Medicare’s rules. The 30% penalty for one year as proposed in the AHCA is a joke that does little or nothing to stop people from waiting until they get sick to sign up for coverage under guaranteed issue.

        • Bart I says:

          I still think some carrot would make the stick go a lot farther. Either a fixed-value tax credit for existing Obamacare-compliant policies to help offset the disincentive caused by the outlandish premiums, or if they ever manage to switch to 5:1 age-banding, then either an age-adjusted tax credit or one worth a flat 33% of the premium.

          I know there’s resistance here to percentage-of-premium as a basis for a tax credit, but the objections haven’t made sense to me up to now. If a tax credit is intended to change behavior (aka cause market distortion), wouldn’t it make sense to cause as much change in behavior as possible per dollar spent?

          Other advantages are that a percentage-of-premium credit automatically adjusts for age and geographical region. And I would expect the implicit Obamacare tax (the portion of insurance premium attributable to community rating and/or minimum coverage requirements) to track with premium, so this type of credit should be good at offsetting the hidden tax.

          • Barry Carol says:

            Bart, I agree with you though I think if the tax credit is going to be a percentage of the premium, it needs to max out at some defined actuarial value of the coverage. Alternatively, if it’s going to be a fixed-dollar age-based credit, the value of the credit for older people should be five times higher than the value for younger people if the older folks are going to be charged five times more in premiums to reflect their population level actuarial risk.

            I would note, however, that the Medicare Part B premium is designed to cover 25% of the cost of the program nationwide which means people who live in low cost regions pay the same monthly premium as those who live in high cost areas. Some may view the current approach as unfair but it does have the advantage of administrative simplicity which is no small thing with government programs.

            • Allan says:

              “Some may view the current approach as unfair but it does have the advantage of administrative simplicity which is no small thing with government programs.”

              That is why knowledge of the facts is important. The locations are already known and documented. Again you are drawing conclusions before learning the facts.The locations are already used to figure out payment schedules for areas a,b, c and d. Will you be trying to find another excuse? 🙂

            • Bart I says:

              I have no problem with a cap on the tax credit. In general, stingier is better. You can always increase an entitlement, it’s harder to claw it back.

              That was my overriding complaint about the AHCA proposal. It gave away too much with no justification I could see, and would have been hard to fix once put in place.

  2. Z Woof says:

    Dr. Tom Price should make the 45 day Open Enrollment start on November 15th and go until January 1st of each year. That way us insurance agents can do a whole years work over the Holidays so we won’t be able to see our Grandchildren. Remember, we are just lowly insurance agents that have lost all of our renewals from a lifetime of work so we should not be able to see our Grandchildren. It serves us insurance salesman right because we don’t have PHDs like the rich people who cut off free speech.

    So Dr. Tom Price needs to stabilize the Obamacare Titanic by helping Anthem Blue Cross throw their employer-based sick people into the Individual Medical (IM) and let the self-employed pools pay all of the medical expense. I guess Anthem Blue Cross, Florida Blue Cross, Oklahoma Blue Cross etc. have more clout on Washington DC that the IOWA Cattlemen Ass., Texas Cattlemen Ass., Florida Cattlemen Ass. NATIONAL Cattlemen Ass., IOWA Corn Growers Ass., Illinois Corn Growers Ass., Indiana Corn Growers Ass., NATIONAL Corn Growers Ass., on and on and on and on.

    These DC politicians might find that the American people may soon Wake Up to their UNCONSTITUTIONAL regulations, orders and dictates.

    Market Disruption or NO Disruption – that is the question. Whether it is nobler…

    Stop the BAN on Ron Greiner

    • John Fembup says:

      C’mon, Ron.

      Give it a rest.

      • Z Woof says:

        John, YOU may think Ron Greiner didn’t add value to the NCPA blog but I disagree. RG emailed me and told me that in Indiana zip code 46032 on 04/04/2017 his STM dropped off the benefits for the 1st 3 Doctor Office Visit Expense (DOVE) so it now is HSA Qualifing insurance. If a single puts $3,400 in their tax-free HSA they save 15% Federal Income Tax PLUS 5% State and COUNTY Income Tax for a total of 20% income tax savings or $680.

        John, John, a 23-year-pld male can get a LITTLE BITTY deductible of $2,500 with 100% coverage for……….drum roll…….$40 less than the income tax savings for the year!!

        JOHN, that’s a LITTLE BITTY premium for these LITTLE BITTY nobodies out here in flyover country.

        If I ever talk to any Indiana people I’m going to tell those HOOSIERS that basketball is a sport for wimps and sissies.

  3. Lee Benham says:

    Tom price says repeal and replace, Trump said repeal or let Obamacare implode.
    Now they are trying to save Obamacare? Looks like Anthem has cut a deal with Washington. Trump and price are selling out to anthem so anthem doesn’t pull out of the exchanges. Trump is selling out the middle class and self employed who don’t qualify for subsidies instead of letting this abomination die!

    • Z Woof says:

      LEE, RG emailed me and said his STM is so cheap now that combined with the HEALTH BENEFITS from his Life Insurance will dump a mountain-of-money (MOM), say, $300,000 with cancer, heart attack or stroke, so you can move to Chapel Hill, North Carolina creating a SEP Special Enrollment Period for Blue Cross of North Carolina, the local MONOPOLY, and their maximum Out-Of-Network charges is $26,000 for a single so you can use the medical provider of your choice and still have a huge wad-of-cash dedicated to your future High Risk Pool (HRP).

      I’m sure a lot of people who are saving with his MAGICAL INSURANCE PACKAGE are just setting around praying they get cancer so in their LITTLE BITTY minds they would hit the lottery.

  4. Allan says:

    I note below all too many solutions for underwriting or insuring a person with a gap in their plans are focused on a government solution which is a political vote getting solution rather than a market solution which is based upon real numbers and involves those that actually insure people, the insurers.

    A market solution will result in lower premiums and other costs, therefore, increasing the number of uninsured.

  5. Lee Benham says:


    Aetna just announced they are Leaving the Iowa Exchange. NO insurance for you Iowa.