President Barack Obama demonstrated just how costly the botched rollout of the federal health insurance marketplace has become for the future of the Affordable Care Act. On Thursday, the president modified its implementation, permitting insurers to offer for one more year policies that in 2014 will not comply with the law’s mandated essential benefits.
The change is temporary, limited to current holders of millions of policies that insurance companies are canceling. It is a response to pressure from panicky congressional Democrats and to weeks of bad press regarding the cancellations and the president’s sloppy reassurance that consumers who like their policies can keep them. But with the reversal, the White House not only compounds confusion that is sapping the promise of the hard-won law. It also runs the risk of undercutting one of the strong arguments for systemic health reform in the first place.
Unpopular as it seems, the provision that is driving insurance companies to cancel bare-bones policies is crucial to the long-term effectiveness of the law. The requirement is that new policies offered under the Affordable Care Act include 10 essential benefits, among them hospitalization, prescription drugs, mental health and maternity care, and dental and vision care for children. These are in addition to such popular steps as barring prohibitive premium hikes due to pre-existing conditions, age and gender.
A sound rationale supports the requirement: As insurers drop the skimpy policies, policyholders buying replacement policies will have better coverage overall when they do face costly illnesses. Further, younger, healthier consumers who tend to favor the low-cost, bare-bones plans would thus move into the larger insurance pool, helping to underwrite the cost of sicker people and more comprehensive benefits.
Insurance companies contend correctly that dropping the meager policies and providing consumers with the robust alternatives the law requires are necessary steps in the transition. Their headache and frustration? The case cannot be made persuasively until consumers can easily compare options to determine whether they are better off replacing their current policies.
This is the critical point where the president and his team have failed the reform effort inexcusably — with the miserable launch of the federal exchange. The extension of the unacceptable policies for another year makes a bad situation worse. It delays the transition to better standard policies. It keeps the young and healthy out of the larger risk pool. It risks overloading plans on the exchanges with sicker people, guaranteeing that premiums will rise to cover the popular benefits. The remedy most urgently needed from the White House is a functioning exchange.