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the national interest

Obama: Okay, This Time You Can Really Keep Your Plan

In response to the raging Democratic freak-out in Congress, President Obama announced an administrative plan that would putatively permit people in the individual insurance market to keep their current plans. It’s impossible to say definitively what Obama’s proposal will do, but the most likely (and best-case) scenario is: very little.

The shorthand explanation for what’s going on here is that everybody — the insurance companies, members of Congress, and Obama — is bullshitting. The longhand explanation is a lot more complicated.

Insurance companies cancel their individual plans all the time. The Affordable Care Act grandfathered in current plans, but that grandfathering mostly depended on insurance companies deciding to keep those plans going, and few of them did: They decided instead to phase out their old plans and create new ones in the Obamacare exchanges. That’s why, even though Obama knew that his health-care law would disrupt the individual market, he didn’t expect the wave of cancellation notices that people have received. In his press conference today, Obama said that he expected that the provisions in Obamacare to grandfather in existing individual policy holders would work, and they didn’t.

Republicans in Congress, trailed by panicky Democrats, are trying to exploit people’s consternation by either allowing (in the case of Republican Fred Upton’s bill) or requiring (in the case of Democrat Mary Landrieu’s) insurance companies to continue these plans. But they are probably bullshitting about this, too: Insurance companies say it’s way too late for them to start reissuing plans for 2014 they hadn’t planned to issue.

Obama’s plan is to let people reup their individual market plans, if the insurers go along with it. Will many insurers go along with it? Probably not, but experts aren’t exactly sure. If not, then all the keep-your-plan promises floating around — Obama’s, the Democratic plans, the Republican plans — are closing the barn doors after the horses have fled.

To the extent any of these proposals actually would work, their effect would be harmful. Most people who have individual insurance now get that insurance because they’re really healthy. Draining them out of the exchanges would leave the exchanges with a sicker pool of customers, eventually driving up rates.

Now, that wouldn’t be a disaster in the short run. Obamacare creates protections for insurance companies that get stuck with sicker customers over the first few years. (A good, short explainer for how this works can be found here.) That would protect the system from the dreaded actuarial “death spiral," but would also cost the government money.

Does Obama’s plan solve the policy problem of people losing their plans? Probably not — the main mechanism is to let Obama throw the blame to insurance companies (many of whom, as noted, originally threw the blame at Obama.) Does it solve the political problem of angry individual market customers? Again, probably not — many and perhaps most people won’t be able to keep their individual plans. Democrats also want the chance to take an affirmative vote to “fix” Obamacare, and an administrative ruling doesn’t let them do that. Obama’s announcement mainly leaves the law in the same place it’s been for a month and a half: waiting to see if the administration can fix the website.

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