A little before noon on Thursday, November 14 our dear leader waved his magic wand and voiced this incantation:
“… insurers can extend current plans that would otherwise be canceled into 2014, and Americans whose plans have been canceled can choose to re-enroll in the same kind of plan.”
When I first heard this I thought Obama was unilaterally changing the law again (I’m not going into whether or not he can legally do that) to allow people who like their insurance to keep it, as he promised so many times. And he was going to fix it so people who had gotten cancellation letters would be able to get their insurance back. I know I’m not alone in that initial assessment and I’m sure millions of people still believe that he did in fact say that.
If you delve deeper into his comments you’ll realize that he made it sound like he is fixing the problem while effectively doing absolutely nothing. Obama’s “plan” is to allow insurance companies who have cancelled policies to reinstate them if they so chose, and if state insurance regulators will allow them to do so, but only for one year. He has made himself into a hero for “fixing” the problem of cancelled policies, a problem he created, while shifting the blame to the insurance companies if this doesn’t happen. Obama may be economically illiterate, but he’s an expert when it comes to understanding the gullibility of the average American.
So did nothing happen? No, something big happened, but he doesn’t realize it yet.
Millions of Americans now expect to get their old, affordable, and completely adequate insurance back. Sure, if it doesn’t happen they’ll be angry with their insurance company, but the true object of their wrath will be Democrats running for Congress. This has team blue running scared.
Democrats in the House and the Senate are preparing two bills to make Obama’s plan into a law. The details of the House bill aren’t clear yet, but the Senate bill has two very important difference from the President’s plan – it wouldn’t just “allow” insurance companies to reinstate the policies, it would “force” them to do it, and it would allow people to keep their old insurance indefinitely. This is huge.
As it stands now (afternoon November 15), it is really up to state regulators as to whether or not policies get reinstated. At least one state’s insurance commissioner, Washington’s, has already declared he won’t allow it. That means 300,000 Washingtonians who received cancellation letters will be forced to buy more expensive Obamacare policies. These people are going to be pissed. Washington’s Democratic Congressmen who are up for reelection will be scrambling to make sure this doesn’t happen, and will push hard to get the Senate bill, or a similar bill the House Republicans are working on, passed.*
Let’s say they pass the bill and everyone gets to keep their old insurance, how is that a big deal? This is when the Law of Unintended Consequences kicks in, and it’ll kick in hard.
For the most part, people who already have affordable insurance, the ones who are getting the cancellation letters (I’m one of them), are younger and/or healthier than the people who are rushing to buy Obamacare plans. These people use few medical services and cost the insurance companies very little, that’s why their insurance premiums are so low. The folks who want to buy the Obamacare insurance tend to be older and sicker, sometimes a lot sicker. They are very expensive to insure because they make frequent large claims, that’s why their premiums are so high, and they sometimes can’t buy insurance at any price.
The entire Obamacare ponzi scheme is based on forcing the young and healthy to pay high premiums for their insurance. Thus money can be taken from them to pay for the medical claims of the old and sick. If the young and healthy do not participate in large enough numbers, the entire scheme will collapse. Do you see where I’m going with this? The President’s plan and the Congressional bills would upset this balance. If enough states and insurers allow people to renew cancelled policies, or Congress forces them to do so, there won’t be enough profitable healthy people signing up to pay for the hordes of expensive sick people. Insurance executives around the country must have been crapping their pants when they watched Obama’s speech.
So the evil insurance companies will lose money, why does that matter?
Two things will happen, both of which could be the stake through the heart that kills this blood sucking law. First, Obamacare premiums will have to go up, the insurance companies aren’t in the business of losing money. If you think a 50%-200% rise in rates this year is bad, wait until next year when rates rise by that amount again. If you’re paying $200/month for insurance now and you’re angry about, but willing to pay $400/month next year, how likely are you to buy insurance the following year if it goes up to $800/month? Healthier people will drop their insurance and pay the penaltax rather than shell out such an outrageous amount, making the Obamacare pool even sicker. This cycle will repeat every year until no one can afford the premiums, causing the notorious Death Spiral.
The second thing that will happen could be catastrophic for the program. Insurers will stop offering Obamacare insurance, especially via the exchanges. Unlike the President and his advisors, insurance company executives can do math. Once it becomes apparent that they can’t charge policy premiums that are high enough to cover the cost of a policy they will kill it. A little over half (52%) of all the counties in the US have access to only 2 health insurance companies through the various exchanges. In 17% of them there is only 1 insurer available, including all of New Hampshire and West Virginia, most of Alabama and Mississippi, and half of North Carolina. It is conceivable that the lone insurer in 17% of the country could decide to get out of the Obamacare business, making it impossible for anyone to buy insurance through an exchange! There is no way to fix that.
If the Democrats’ goal is to see Obamacare succeed (yes I know re-election is the only real goal), the worst thing they can do is allow healthy people to opt out for another year or more. Economic reality will destroy the program. The President doesn’t yet comprehend what he’s done, but he’ll find out soon enough. Unfortunately for Obama, Vladimir Putin won’t ride in from the steppe to save his butt this time.
* Just as this article was being submitted the Republican’s “Keep Your Health Plan” bill passed the House with support from 39 Democrats.