The Obamacare Slippery Slope–What’s Your “Hardship?”

As of this morning, here are the new rules.

If you had a health insurance policy that was cancelled, you are now exempt from the individual mandate and its tax penalty should you not decide to buy a replacement policy. In addition, you can now sign up for the very high deductible Catastrophic Plan that was originally reserved only for those under the age of 30.

If you did not have a health insurance policy that was cancelled, you are still subject to the individual mandate and you are not entitled any special treatment toward signing up for the Catastrophic Plan. You must pay the full price for an exchange plan and accept whatever out-of-pocket costs and network limits it might have for the money.

The administration made this change under the “hardship” provisions already part of the law. They have simply defined hardship as having lost your old individual plan and your not being able to find something without it being a “hardship” to purchase, presumably over price or coverage.

This change was brought about when a number of Democratic Senators, some of them facing a tough reelection battle, demanded this concession.

The change was made without consulting the health insurance industry and it was a surprise to them. It is another Obamacare change months after their 2014 rates were set under the presumption all of these cancelled policyholders would be paying a lot more premium into the pool than they pay today.

One has to believe this will not be the last concession to Democrats under reelection pressure.

One has to wonder how this can’t other than undermine further how people feel about Obamacare––particularly its fairness––and taking their “social responsibility” to sign-up seriously.

With all of the Democrats whose reelection is threatened, how many more of these should we expect?

When it’s all done, will this make those who lost their health plans happy?

Well, they had a health plan they presumably liked and/or could afford. Obamacare forced its cancellation. Now the administration is saying they will not fine them for being uninsured and will make a very high deductible plan available to them.

It’s hard to see how they will see this as an improvement.

Robert Laszewski has been a fixture in Washington health policy circles for the better part of three decades. He currently serves as the president of Health Policy and Strategy Associates of Alexandria, Virginia. You can read more of his thoughtful analysis of healthcare industry trends at The Health Policy and Marketplace Blog, where this post first appeared.

33 replies »

  1. “One has to wonder how this can’t other than undermine further how people feel about Obamacare––particularly its fairness––and taking their “social responsibility” to sign-up seriously.”

    Can the administration get any more stupid – apparently so.

    I wonder how this would hold up to the 14th Amendment of Equality?

  2. Actually, as one of those employees you mentioned, I will take a huge hit in the ACA.

    People like me are hired by institutions who attract us with large benefit packages that make up for the lower salary compared to our private sector peers. My insurance package has already, since 2011, changed dramatically (whereas previously it basically stayed the same for YEARS-ever since I started). And believe me if ACA stays the law, we will eventually lose our insurance and if lucky get money to pay for it ourselves on exchange. Also, my gold plated insurance will be taxed like income.

    So we will take a hit to our salaries and also to our benefits–with no ‘equal’ compensation.

    Not only will we, indeed, contribute towards funding the uninsured, but we will be driven out of the very institutions that need us most, because we are the ones who serve the disadvantaged and uninsured! The irony! After 20 years of spending my professional life in service to a population that has the most needs, I am now being forced to look at other options to feed family and pay mortgage, and it is ALL directly due to the ACA.

  3. Why not the egg nog, at least a chance to get snookered for a few hours!

  4. No need to worry, Bob, health insurers will be subsidized back into profitability. They will use their enormous political clout to make sure their CEOs continue to take home multimillion-dollar salaries and their shareholders continue to get double-digit returns from their stock holdings. This will be done even if we, the taxpayers, have to pay for it by expanding the Fed’s balanced sheet even further and borrowing even more from the Chinese and the House of Saud. There is very little doubt that Big Insurers are just behind the Big Banks when it comes being too big to fail.

  5. Either we have not enough “preserve, protect and defend, or we have “the best of (his) ability.”

    Either was the country is screwed until 2017.

    Hope it makes it.

    Please pass the jelly.

  6. Once we have managed to stamp out of existence any nexus between “quality of care” and ability to pay, ushering in a golden era of homogenized medicine, we can turn our attention to the gross disparities in housing, transportation, and other essentials.

  7. Wow, what fun to read from either hopelessly delusional or pathologically partisan driven readers who think that PPCA/Obamacare is going to save this country’s health care system. Um, let me let you who are at least a bit unbiased and objective in on a little fact, when people start changing the rules after the rules are alleged written in stone, but before the Legislative Branch is allowed to legitimately change said rules, it is because the rulers making said illegitimate changes are trying to hide their screw ups, and want to continue to mislead and take advantage of people who have clueless faith and hope in their leaders.

    So, anyone here who continues to spew the falsehoods that what Obama et al are doing is responsible and fair, you are an idiot at the very least, a liar more likely, and an antisocial cretin trying to harm society most apparently. And to the Polar opposites screaming this law is completely false and without basis, well the same appraisals go for you being Republican hacks who have done next to nothing to rally the public to support anything of legitimate substance to counter the Democrap assault on America.

    So, look at facts and trends, not partisan platitudes and just mindless campaign slogans to keep/get the party candidate to hold an office. Rule number 1, things are not fine in America, and things that should be resolved to a responsible public’s attention and expectation have not been completed, so who the hell gets to go on a three week vacation?

    No one who is accountable and at risk to lose a job. But, if you vote, excuse me, you can hold them accountable and tell them their job is gone.

    Oh, my mistake, that means you have to take your heads away from the myriad of screens and petty distractions to do what is right and responsible. That eliminates probably half the country, and probably two thirds of the commenters here!

    Happy Holidays. Your country depends on you to buy things and be distracted from the truth the next 2 weeks, at least.

  8. Note to Cynthia:

    the large insurers make more money from Medicare Advantage than they have ever made from the individual market. Probably the small group market also.

    Individual insurance has huge collection costs, higher commissions to agents,etc The insurers stayed in business by strict underwriting.

    The ACA has taken away underwriting. The whole market is on life support.

  9. No, health insurers won’t bail out, they’ll simply be bailed out, by you and me the taxpayer. Just as it happened to the big banks in 2008.

    Obamacare is literally the OPPOSITE of single payer; the adoption of Obamacare ensured that single payer would be off the table for another generation (at least).

    Any liberal who thinks that Obamacare is the stepping-stone to Canadian style single payer is seriously delusional — Obamacare was WRITTEN by insurance company executives!

    Ask yourselves this: why is it that the insurance industry is not fighting Obamacare tooth and nail? It’s because they are about to reap incredible profits by ripping off consumers and the government — the henhouse door has been permanently opened to the foxes.

    If a single payer had been allowed to go thru, we wouldn’t be having these problems! “Obamacare” is a crony capitalist idea and only helps the insurance companies! The country should “grow a backbone” and pass single payer!

  10. Continuing to provide catastrophic coverage under ObamaCare will mean less profits for health insurers. But health insurers won’t stand for that, nor will Wall Street. In order to keep their stock prices well within the double digits, health insurers will demand that Obama provide them with even more federal subsidies. How can Obama claim that ObamaCare will significantly reduce healthcare costs when he keeps handing out even bigger corporate welfare checks to private insurance companies? And how can Obama claim that our healthcare system is based on the principles of free-market capitalism when health insurers can’t stay afloat, less make a reasonable profit, without receiving loads of support from the taxpayer?

  11. I was unaware that a US President could change laws at a whim?

    Perhaps he should also suspend gravity, so that Americans don’t feel so fat!

    I guess anything is possible when you’re the Messiah?

  12. Not for the great majority of voters who are covered under group plans, and certainly not for those who don’t resonate to “Mediocre insurance for all!”

  13. Someone pointed out in another blog last week that the insurance companies don’t care about being the “bad guys” because we need them.
    By the same token, if the market for health insurance is going south, they could just bail out altogether. Then single payer becomes a real option.

  14. But the major insurers never had more than a small part of their “book” in the individual market, limiting their exposure to the exchanges. They “adapted” to the acute threat of “single payer” and “public option” schemes. Conservatives are now in control of the House, and picking up speed. The insurers, ultimately, will be directed by their stockholders, and we know what a blood-sucking lot they are.

  15. Dr. Mike – you’re right that Medicare/caid supp payments for uninsured are just for hospitals. But docs, esp large doc groups, extract higher commercial rates to offset losses from pub programs. Hospital-owned docs’ – a trend, as I’m sure you know – salaries balance the loss on uncomp’d care with commercial income. The broader point is that premiums for commercial and Medicare, and taxes funding Medicaid and Medicare, are increased due to uninsured. It’s not just the exchange crowd or a certain income group, as some here are contending.

  16. “what will be the fate, going forward, of the members they insured during the year?”

    Same as what is happening now, SOL. The administration will probably try to come up with some emergency scheme, but, like now, after all the changes insurers have made to adapt to the system, how can they just reverse it in a heartbeat? Obama seems to think 2013 was not such a bad year, but I predict it will be a cakewalk compared to 2014 for his administration.

  17. Pajama Boy, indulging in a little ideological slumming, saw Mr. Laszewski last night, on the Kelly File, explaining the acute unease all this is causing insurers, and said “Whatever.” It set me to wondering, though, what mechanisms are in place to deter insurers from withdrawing from the exchanges, should they conclude they are actuarially unsustainable. As I understand it, the taxpayer will be “back stopping” the exchanges for at least the first year, averting excessive losses. But should insurers decide to withdraw from the exchanges at the end of 2014, what will be the fate, going forward, of the members they insured during the year?

  18. I have worked in three states and have never seen it work this way, unless you are only talking about hospitals. But for physicians, What mechanism is there for insurance to supplement uninsured care? If every patient I saw had medicare I would go out of business, so how can one say there is a supplemental payment? FQHCs work this way, not private practice.

  19. Thus the need to conceal, from the middle class, that it was to be indirectly taxed, by jacking up premiums.

    You’re not suggesting that individuals making $50,000 a year are “affluent,” are you?

  20. Arguably the cost of the uninsured is borne by anyone who has any health insurance and the uninsured who actually pay for care out of pocket. Even Medicare and Medicaid include supplemental payments for providers seeing a high number of uninsured. Also, while there’s some debate about this, few question that provider rates (especially in the individual and group markets) are inflated to compensate for costs associated with the uninsured. All of this impacts premiums as well as the need for taxes associated with the govt programs.

  21. To be more precise:

    the cost of funding the uninsurables will fall on those persons making over 400% poverty who stay in the individual market.

    A highly paid federal employee or tenured professor with great employer-paid coverage pays nothing to help the uninsured. (unless they make over $250K a year.) A senior with Medicare pays nothing to help the uninsured unless they make over $250K a year.

    This is because the ACA was passed with no general tax increases. That was pleasing to affluent Democrats and of course was necessary to hold off the Republicans.

    But this aversion to tax increases always leads to an unfair dumping of costs. Even the very limited health reforms of the last 25 years like EMTALA and HIPAA were passed without any funding.

  22. All this does reinforce the awareness that the costs of funding the medical needs of the uninsured and uninsurable will fall, not on “fat cat” insurers, but on schumucks making $50,000 and up a year.

  23. Any law that depends upon people acting socially responsible is by definition a very bad law. People act how people act. Every time. A good law works because it is both what people generally think is right and when there are consequences for breaking the law.

  24. Judy: yes. They will be eligible to purchase the same plans as the sub-30 crowd from their exchange websites. Same price. They will need to provide documentation of their plan cancellation to their catastrophic plan issuer.

    Didn’t we always know the Admin was going to be VERY lenient in granting hardship exemptions, especially in 2014? This was a slippery slope as written in 2009 and it was always a question of where to draw the line. Adding a new exemption criteria to the existing list for about 500k people is hardly a radical development with the law.

  25. Per Avik Roy, who may come out of this with flying colors. the ACA catastrophic policies are not too much less costly than the bronze plans.

    Which makes sense. Guaranteed issue ALWAYS costs more than underwritten insurance.

    J Gruber was arrogant enough to say that preferred risks have won the genetic lottery and should be forced to pay more. Good luck on that one!

  26. So how does the logistics of this work for people with cancelled policies? Can they go to the exchange websites? In other words, where do these new catastrophic policies come from and for people over 30 is the rate the same as under 30?

  27. What a complete and utter joke this man has made of his “signature” legislative effort. He keeps changing the rules unilaterally, and the loser ilk of partisan supporters just go along with it without a peep of concern or debate.

    And yet when Bush et al did similar things, all we heard from the Left/Democrats was how abusive and self serving the Right/Republicans were.

    How do I spell “hypocrisy” these days. Just note who is in power and majority rule and use their names/party association.

    It is beyond despicable how the characterological behaviors of entrenched incompetent incumbents and their cronies use these immature and irresponsible defenses to claim their right and continued insult on citizens. And so many here are Example A of this garbage!

    I don’t understand why the Republicans don’t at least start impeachment proceedings for such abuse of Constitutional violations. Let the public ignore or validate it by not supporting the Legislative Branch’s obligations to maintain accountability and control, then we see once and for all what I know is the truth of the electorate: 40% of voters embrace antisocial attitudes like torture without accountability or taxation without restraint.

    And when Obama and his ilk commit overt tyrant actions in the next year, the public can only blame themselves for the apathy, ignorance, and clueless support of violations of democracy.

    I have no faith in the public at large, and if you do, what planet are you and this country on these days!?

  28. This is politically motivated backpedaling. If they thought the law was so great, they should be steadfast with the regulations. Then again, it’s taken two months to get the website reasonably functional, so I guess they have to give people some leway.
    Piecemeal enforcement, just like the law was put together in the first place.

  29. The cancellation debacle of the last few months actually has close to 50 versions. Each state had some latitude in what insurers could do to old policies and what options were left to the insureds.

    History will show that the lack of federal control has been more pernicious to the ACA than centralized power.

    If the ACA survives the next few months — and that is no sure thing — then we would be well advised to have a firm national policy that deals with group insurance.

    The ACA is attempting to craft a quasi-socialist health system using private insurance companies that are not regulated from Washington. This could prove fatal.