November 14, 2013
Ezra Klein warned readers that “Obamacare is in much more trouble than it was a week ago.” The main reason is a bill being push by Senator Mary Landrieu that would require insurers to continue to offer plans that are in effect at the end of 2013.This bill is drawing support from a number of centrists and even liberal Democrats. Klein argues that this bill would risk seriously skewing the individual insurance market that would create a major problem of adverse selection, with healthy people staying on private plans outside of the exchanges.
There is actually much less risk here than appears. First, Republicans would be highly unlikely to support Landrieu’s bill since it would require insurers to continue to offer plans even if it is not profitable to do so. It is unlikely that the Republican House would approve a bill that could lead to major losses for many insurers.
The other factor to consider is that even if the bill were to be passed into law, the number of policies protected would be limited. As Klein’s colleague Glenn Kessler showed, almost two thirds of the plans that people hold in the individual market are typically in effect for less than a year. This means that whatever skewing might result from its passage into law would be relatively limited and gradually go to zero as these people’s circumstances changed (e.g. they get hired by companies with employer provided insurance).
Note: Robert Salzberg pointed out to me that the Landrieu bill would make the date where a plan must be in effect to be grandfathered December 31 of 2013, not January 1 as I had previously written.
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