Why Delaying Obamacare Has Insurers Freaking Out

The health insurance industry already had plenty to freak out about with the implementation of the Affordable Care Act. Simply complying with the law is a massive undertaking, never mind the terrible HealthCare.gov debut. But the botched rollout has produced a new source of anxiety for insurers: the growing bipartisan support for delaying parts of the act’s implementation.

Republicans have wanted to delay the law’s individual insurance mandate for years. They’ve voted on it in the House, and Sen. Marco Rubio, R-Fla., is keeping the idea alive in the upper chamber. Delaying the mandate would be terrible news for insurance companies, but so far they haven’t had to take a strong position on most of the GOP’s proposals. They have been counting on political gridlock to take care of the issue: A delay wouldn’t happen, so insurers didn’t have to break with their anti-Obamacare allies or publicly side with pro-Obamacare Democrats on the issue.

That tone is changing, though, in the wake of HealthCare.gov’s woes. Sen. Joe Manchin, D-W.Va., is working on a bipartisan bill to delay the individual mandate for a year, a move that has set off alarms inside the industry. “The individual mandate is inextricably linked to the insurance-market reforms included in the health care reform law,” said Robert Zirkelbach, a spokesman for America’s Health Insurance Plans, the industry’s leading trade organization.

The health care law essentially strikes a deal with insurance companies: They are required to cover people with preexisting conditions, and they can’t charge people more based on those conditions. Both of those policies will cost insurers money—potentially, a lot of it. So the law also includes three tools to minimize their financial risks: the individual mandate; subsidies to help people afford insurance; and a defined window to buy coverage.

If lawmakers start fiddling with those incentives, the equation gets worse for insurers. There are minor changes that the industry could probably weather, maybe easily. But just the idea of weakening those safeguards is enough to make insurers nervous. A handful of states tried in the 1990s to enforce guaranteed coverage, but without the safeguards that Obamacare includes for insurers. Premiums in those states skyrocketed, growing by double digits each year until they were so expensive that the reforms ended up increasing the number of uninsured people.

Democrats protective of the Affordable Care Act have held the line so far on changes to its important provisions. The individual mandate might not be politically popular, but Obamacare won’t work without it, so the party was stuck with it. That put Democrats and insurers on the same team.

This unenthusiastic alliance is starting to weaken now because of the website’s shortfalls. The site’s myriad technical problems have made it supremely difficult for anyone to shop for coverage, much less enroll in a plan. Some Democrats see those failings as a burden on consumers and argue that it’s only fair to give people a break from the law’s other requirements.

A delay in the individual mandate remains unlikely, even though it’s getting fresh attention on Capitol Hill. But insurers are also worried about another proposal that’s attracting Democratic support beyond the moderate, perennially vulnerable Joe Manchins of the world.

Sen. Jeanne Shaheen, D-N.H., is leading a push to extend the open enrollment period—the six-month window during which consumers are able to buy coverage through the law’s new insurance marketplaces. The window opened Oct. 1 and runs to March 31.

Yet if enrollment wasn’t available for one or two of those six months, Shaheen argues, Washington should add another month or two on the end, to give people the full window.

“Extending this period will give consumers critical time in which to become familiar with the website and choose a plan that is best for them,” Shaheen wrote in a recent letter to Health and Human Services Secretary Kathleen Sebelius. “Individuals should not be penalized for lack of coverage if they are unable to purchase health insurance due to technical problems.”

Although it sounds like a minor adjustment, the fact that there’s a defined open-enrollment period is a big deal for insurance companies. Extending the window would be “destabilizing” for insurers, Zirkelbach said.

Their primary goal is to cover as many people as possible who won’t file big claims. It’s the defined enrollment window, not the individual mandate, that prevents people from waiting to sign up for insurance until they’re on their way to the emergency room. So extending the window could make it easier for young, healthy people to go without insurance until they absolutely need it. “If these vital enrollment incentives were to change, the premiums health plans filed for next year would have to increase,” Zirkelbach said.

Whether Congress or the administration will actually try to weaken the mandate or extend the enrollment window depends largely on whether and when HealthCare.gov is fixed. If HHS meets its end-of-November deadline, everything can probably continue as scheduled.

“Unless there is far more disaster than the administration is admitting right now, it would be a really bad idea to delay and cause more problems for insurers nervous already about what kind of risk pool they’re drawing from,” said Tim Jost, a Washington and Lee University law professor and a supporter of the Affordable Care Act.

But if people still can’t sign up for coverage as we get closer to Dec. 15—the deadline to buy a plan that takes effect at the beginning of the year—the calls for delays will get a lot louder.

“I don’t see what other choice the admin would have,” said Dan Schuyler, who tracks the health law’s exchanges for the consulting firm Leavitt Partners. If not enough young people enroll, he said, “I don’t think there’s any other alternative but to extend open enrollment another 30 or 60 days.”