Why Health Insurance Cancellations Shouldn’t Be a Surprise
A former federal health official says consumers in the individual health-care market deserved more of a heads-up about what was coming under Obamacare.
![.](https://webarchive.library.unt.edu/web/20131106083519im_/http://www.propublica.org/images/ngen/gypsy_image_lead_ngen/ht_kip_piper_300x200_131105.jpg)
Kip Piper
There seems to be no letup of bad news on the Affordable Care Act. Yesterday, Healthcare.gov, the problem-plagued federal health insurance marketplace, crashed again. And a pile of news reports focused on citizen anger over policy cancellations prompted by the law.
Last night, President Obama addressed the situation. Passing the act 2010 “was the easy part,” he said. Though he’s done campaigning for office, Obama said, "I’ve got one more campaign in me – the campaign to make sure that this law works for every single person in this country."
To get behind the headlines, we reached out to a leading expert on the law: Kip Piper, who advises large health care organizations on Medicare, Medicaid, and health reform policy, finance and business strategy.
Among other roles, Piper has worked as senior adviser to the administrator of the Centers for Medicare and Medicaid Services (CMS), Wisconsin state health administrator, director of the Wisconsin Medicaid program, a senior Medicare budget officer at the White House Office of Management and Budget.
"The fact that ACA would effectively nuke most of the existing commercial individual health insurance market was never in question," Piper told us.
In the interview below, which was edited for length and clarity, Piper discusses cancellations, the apparent surge in Medicaid enrollments under Obamacare and whether more transparency would have helped the rollout.
Q. What’s your take on the coverage cancellations arriving in mailboxes around the country?
A. It was always known that the ACA would outlaw millions of existing individual or non-group health insurance policies. From a policy wonk perspective, that was a no-brainer. It was self-evident in the law in March 2010 and confirmed in subsequent rules and analyses. Also obvious all along was that consumers would face a very different marketplace under the ACA, with some seeing lower premiums (including me), some seeing larger premiums, and most everyone seeing higher deductibles, higher co-pays, and a narrower choice of providers.
Quantifying the impact of ACA on the individual — estimating the number of people affected — was always tough. Whether it would cause 60 percent or 80 percent of individual plans to be cancelled was hard to estimate because data on individual coverage is hard to come by, rules and products varied by state, the ACA grandfathering rules came out slowly and in pieces, and even things like the essential health benefit package varies a bit by state. Also, not all these policies expire on December 31.
What’s frustrating is how it took three and a half years, the failed launch of the federal exchange, and the news media starting the question the administration’s core talking points for anyone to focus on this. Whether you like or dislike the ACA policies, the 19.4 million Americans in the various parts of individual market deserved a heads up.
Q. Could this have been prevented?
A. From a regulatory perspective, health insurers in the individual market have no choice but to discontinue non-compliant policies and, if they wish to keep business, offer new, compliant policies. Health insurance is a binding contract. Insurers can’t merely transfer people. They have to cancel policies that no longer meet federal and state law, give notice, and then try to sell people into the new one policies. Having said this, the new policies will generally be more expensive. The ACA requires people to buy a richer benefit package – it only permits sale of the richer benefit packages. You can argue that this is better for society but there is no free lunch and it does eliminate choices many consumers were fine with.
The higher cost sharing – deductibles and co-payments – that many are seeing (including me) is an inevitable byproduct of the ACA insurance market rules, the brave new actuarial risks of the post-ACA marketplace, and competition based on premiums and brand.
Q. Is Medicaid a success story here?
A. Medicaid enrollment data from the states with their own exchanges certainly suggests a surge in Medicaid. It’s still early but it appears that the surge is a combination of ACA Medicaid expansion and the woodwork effect – bringing in individuals already eligible but not enrolled. Medicaid rolls will also increase somewhat as individual commercial polices are cancelled, high-risk pools end, and some small and mid-size employers drop coverage.
Today, Medicaid covers about 74 million Americans. Given all the unknowns, including economic conditions, projected Medicaid enrollment by 2020 ranges from 85 million to 102 million. Regardless, the role of Medicaid in the marketplace and impact of Medicaid on federal and state budgets will only grow.
Q. Should the contractors behind healthcare.gov be penalized?
A. Determining accountability for the healthcare.gov mess is very tricky. Both the CMS and the multitude of contractors were responsible for the project, with a maze of interdependencies. Parsing out responsibility for the many failed parts of the federal systems for Obamacare will be difficult, will take months, and an independent party such as GAO or the Inspector General. Overall, it appears that there will be considerable finger pointing in all directions, with plenty of blame to go around.
CMS made several significant strategic blunders, most notably the decision to manage the project in-house rather than hiring a systems integrator. Hiring a systems integrator to honcho the project, serve as a super general contractor, make the disparate pieces work together, and oversee testing and problem solving was essential. CMS simply does not have the experience or capabilities to do this in-house. Retaining an integrator would have been expensive, probably at least $75 million on a project this size. Perhaps they didn’t have the budget, but otherwise the decision to handle system integration in-house is inexplicable and proved disastrous.
The Obama administration decided to avoid making decisions during the 2012 election year. Given the nature of elections and the array of winners and losers under the ACA – most of whom still are unaware they are winners or losers – this is perhaps understandable. However, CMS had no choice but to follow orders and avoid making decisions or revealing information about the controversial law during the election. That meant countless critical decisions that should have been made in 2011 and 2012 were not made until well into 2013, leaving little time for problem solving, system integration, and testing. To this day, nearly 44 months since the law was signed, not all ACA-related decisions have been made, with many less critical rules deferred.
In the end, whether in the form of reasons or excuses, the contractors have plenty to point in minimizing their share of responsibility. It appears they have covered themselves with a paper trail of warnings to CMS.
Q. You’ve been particularly critical of the administration’s transparency and follow-through on its own rules.
A. Presidential executive orders have long required cost estimates and impact analyses for every major proposed or final rule. In Executive Order 13563, President Obama reiterated the longstanding requirement and further directed each federal agency “… to use the best available techniques to quantify anticipated present and future benefits and costs as accurately as possible.” A Regulatory Impact Analysis (RIA) must be prepared for rules with economically significant effects — anything with an impact of $100 million or more in any one year. Obviously, every ACA rule had an impact of over $100 million.
However, early on CMS stopped providing cost estimates for rules implementing the Affordable Care Act. Most were omitted entirely, others watered down to be meaningless statements the analytical equivalent of saying, “The hell if we know what will happen.” They even started explicitly saying in ACA rules — including the massive Medicaid expansion rule — that the rule didn’t have an impact of over $100 million because, in effect, everybody expected it.
My understanding is that CMS was directed by the White House Office of Management and Budget (OMB) to stop publishing the cost estimates and impact analyses with the ACA rules. They were concerned the information, coming from the CMS Office of the Actuary, would be used as ammunition by the House and other critics of Obamacare. That is certainly true but no excuse for ignoring 30 years of executive orders and the President’s own stated commitment to open government.
Read more of Kip Piper’s exchange with ProPublica’s Charles Ornstein here.
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3 comments
Canus Rufis
Yesterday, 5:01 p.m.
Great explanation Kip! So why didn’t this administration and/or congressional leaders explain the cancellations (aka constraints to implementing ACA) this way from the very beginning? Wouldn’t that be real transparency? You know make the American people part of the process!? I recently hired a painter to paint my house. The process was NOT he shows up, paints what ever color he pleases and charges me an astronomical amount for the service. Instead we talked about colors, any needed repairs, he quoted me a price and I shopped it around. There were no surprises. Now you’ve got millions of people feeling nervous and betrayed on both sides of the aisle. Yet no one is held responsible in grand, big government fashion. Terrible leadership!
Putting lip stick on a pig doesn’t change the pig.
so tame
Yesterday, 7:34 p.m.
It may be true that the ACA seems problematic, learning how to sell insurance, but don’t worry because I heard….
... that Obama has the often overlooked ‘back-up cast of doctors & psychiatrist’. Presently working for the CIA, State Dept., & the Military, this large staff of patriots all are supported by the American Medical Association.
so tame;)
Cara S.
Yesterday, 11:09 p.m.
If it “shouldn’t be a surprise” that millions of insurance policies people liked and wanted to keep were cancelled, why didn’t the dauntless investigative team at ProPublica expose the lie in 2010? If ProPublica knew in 2010 that the president’s claim that “if you like your policy you can keep your policy” was a lie, why did ProPublica not speak truth to power then?
Let me guess. When ProPublica carefully arranges the words “get behind the headline” following yet another rallying cry of “I’ve got one more campaign in me” those are marching orders. The orders are to “get behind the president” speaking through the headlines and fall in behind a leader making a promise that no agency considers realisitic—the lie that “the law works for every single person in this country.”
Officials recognize now and they recognized in 2010 that millions will remain uninsured. That’s why authors of the mandatory insurance act included a tax on those who don’t comply. If you say the law works for those people - who don’t consider high-priced insurance a value during the year-end signup period but who can only sign up for insurance three months out of the year— the lie is true, white is black and up is down.
If by “every single person” you mean the single people who earn under $25,000 a year and refuse to marry a partner who earns around $35,000 a year because they would lose their subsidy, yeh, the law works by making marriage a financially untenable decision. The law
“works” for those single people by giving them a reason to stay single.
But law doesn’t work for the jilted $35,000 a year earner who doesn’t make enough money to compete as a spouse with the deep pockets of the federal dole provided to “every single person” who stays single, keeps their income low and gets a subsidy.