More deciphering of insurance cancellations

Once again the Obama administration has managed to trip over its own message - badly. The president's "promise" that policyholders would be able to keep their present heath care coverage doesn't mesh with the millions of people (hundreds of thousands in California) who have received cancellation notices - and who, in many cases, are being asked to pay significantly higher premiums. Forget the website, this is the story that's getting everyone's attention - and indeed Obama's misleading comments show either an appalling ignorance of his own plan or a willful distortion of the law's confusing facets. Either way, it's not great. However, it's not the whole story, as I posted on Tuesday. Policies are being cancelled because, for various reasons, they don't adhere to the minimal standards that were established under the Affordable Care Act. Comparing those old plans to the ones now being sold is like comparing an orange with a grape. But it's far more involved than that - the Washington Post's Ezra Klein says that determining price has always come down to three things: comprehensiveness, accessibility, and affordability.

The Affordable Care Act makes individual market insurance both more accessible and more comprehensive. The accessibility comes from barring discrimination based on health status and limiting discrimination based on age. The comprehensiveness comes from setting minimum standards about what insurance needs to cover and what kind of limits it can set for out-of-pocket expenses, etc. What's important to understand about this trilemma is that it means, roughly, that every change has winners and losers. Put bluntly, the Affordable Care Act's changes are raising insurance premiums for some people who did well under the old system and lowering them for many of the people who were locked out or discriminated against. A good example of the tradeoffs is the case of Dianne Barrette, a 56-year-old Florida woman who's been featured in the media because her current plan will cost 10 times more under Obamacare. As Erik Wemple discovered, her old plan was health insurance in name only. It didn't cover inpatient hospital care, it didn't cover ambulance services, and so forth. Under Obamacare, all plans have to cover those benefits. So Barrette's old plan was extremely affordable -- $56 a month -- because it covered basically nothing. Her new plan is much more expensive but also much more generous.

As you might gather, this is enormously convoluted and none of it has been explained very well by the White House. Why? Because, as Klein points out, every change has winners and losers and no elected official wants to admit that as part of the greater good some people will wind up on the short end (even though many of those people are entitled to subsidies and they're all probably better off in the long run with a plan that offers more coverage).

One thing to note about the media coverage around this is that some of the old plans in the individual market are being canceled or moved onto the exchanges at a time when the exchanges aren't really working. So we're hearing from people losing something but we're not hearing much yet from the people who're gaining insurance, or lower-priced insurance, through the law. That's another consequence of the web site's failures, but it's a temporary one. There will be some losers under Obamacare, but because of the subsidies, many more winners.