What Happens If You Destroy Plan B?

There is a great freedom to taking a “risk-free” risk.  One example that comes to mind is the high school student that creates a business.  His parents are his main support.  Everyone wins if the new business takes off.  And if the business fails he simply gets another part-time job while attending school.  The student in this example always has a Plan B.  The only real risk would be if the student did something that endangered the family assets or the way the parents earned their incomes.  We all understand the value of having and protecting a Plan B, a backup plan.


A decision was made in 2010 to guarantee health insurance coverage, the way most Americans access and pay for health care, to people with preexisting conditions.  This was, for many Americans, the most important feature of the Patient Protection and Affordable Care Act (Obamacare).   The thinking wasn’t all that complicated – If you herd everyone into one large insurance pool, the sick and the healthy, we would spread the risk evenly making it possible to cover even the most unhealthy amongst us and at a reasonable premium.  Part two was that even if you are healthy today, there is no guarantee that you won’t be unhealthy tomorrow.  Pooling our risk made it more likely that insurance would be available when you eventually need it.


Did it work as planned?  NO!  The law may have been crafted with the best of intentions, but it fell short.  And, just as importantly, the PPACA had any number of opponents working against its success from day 1.


The law was dependent upon participation.  It was a given that the sick and injured would sign up for coverage.  I remember the initial Obamacare enrollment in the fall of 2013 for coverage beginning January 1, 2014.  I had families save over $1,000 per month with their new policies.  The new maternity benefits were very popular.  Young women and the unhealthy under age 65 all left my office smiling.  

Somebody has to pay.

Newton’s Third Law is that for every action there is an equal and opposite reaction.  If Doctor Herman’s (name changed) coverage decreased $1,200 per month, the healthiest amongst us are going to pay more.  There was a reason the insurance company was charging the higher premiums for those with preexisting conditions.  Worse, those higher premiums were often capped by law and didn’t begin to cover the claims incurred.  If the insurance pool is properly stocked with healthy people, we can withstand the claims of the unhealthy.  But, every time a healthy person leaves the insurance pool, the risk, the claims, are spread over a smaller group of premium payers.


I don’t believe that this is particularly hard to understand.  This concept of insurance is based on RISK, the possibility that you will need access to care.  We cannot build a system based on CERTAINTY, the knowledge that you will need care and that the cost of care is more than the cost of insurance.


The original law included the Individual Mandate, which penalized those who chose to not participate.  That has been eliminated.  There have been many attempts to weaken of sabotage the PPACA.  Last October the Trump administration published new guidance for Section 1332 waivers, the Obamacare provision that allowed states to improve the law.  Here is the link to the federal registry.  Reaction was swift and almost universally negative.


Most observers saw the new rules as a direct attack on people with preexisting conditions and the coverage that they so desperately needed.  The change allowed a state to note the existence of a Plan B (access to a policy compliant with the Patient Protection and Affordable Care Act) while actively promoting non-compliant policies that may not protect people with preexisting conditions.  It is no longer a “risk-free” risk if you destroy Plan B! 


Evaluations were quickly published by Deloitte, HealthTech Solutions, and Health Management Associates.  Within two months the Federation of American Hospitals, the American Academy of Family Physicians, and even AARP had weighed in and expressed concern.  These and others note the administration’s promotion of short term limited duration policies is designed to attract the healthier people from the comprehensive insurance market which will inevitably cause the prices to rise substantially.


The Democratically controlled House of Representatives passed H.R. 986 – Protecting Americans with Preexisting Conditions Act of 2019 last week.  This is the link to the text.  The goals of the legislation are:

1. Prevent the destruction of the comprehensive insurance market (Plan B) by over-inflating the value and desirability of short term and other non-compliant policies.  
2. To retain the value of the 1332 waivers in lowering prices by the creation of reinsurance pools and other innovations.  
3. To enrage President Trump and draw a distinction between the political parties.

It is hard to guess whether or not this legislation will ever be addressed by the Senate, so goal 3 is the only certainty.  The White House issued a Statement of Administration Policy on May 7^th, two days in advance of the final vote.  The final vote was primarily along party lines.  Republican Leader Kevin McCarthy published the amendments his members offered while the legislation was under debate.  My favorite was from George Holding (R-NC).  He proposed to change “the title of H.R. 986 to Insert Politically Punchy Title That Doesn’t Reflect The Bill Substance Act”.  That constructive effort garnered 184 votes on the House floor.  There isn’t any record on the Republican Cloakroom site of any productive amendments or any effort to improve the legislation.


I certainly hope that Mr. McCarthy and his buddy Mr. Holding never have to rely on Plan B.   Because if they have their way, it won’t be available when they need it.


DAVE

www.cunixinsurance.com

Picture – No Outlet – David L Cunix