Earlier this year the administration decided to renew automatically the insurance policy of anyone who currently has coverage through a federal exchange if he or she doesn’t return to the website to select a new plan or update personal and income information.
The decision helps the administration avoid the potential embarrassment of a large number of people dropping coverage by not renewing their policies. But it will cause serious problems for many who listened when the administration said there’s no reason to return to the exchange because they’ll be automatically renewed in the same or a similar policy. The administration’s decision will hit those Americans in the wallet, good and hard.
First, most Americans’ income fluctuates from year to year, particularly for those with relatively low incomes. Subsidies are based on estimated income, and those who don’t update their information will be getting subsidies based on estimates from when they enrolled in late 2013 or early 2014.
Expecting a year-old estimate to be good for the following year is almost certainly unwise. Individuals whose income rises in 2015 are going to get more subsidies than they should, and at tax time they will have to pay back those excess subsidies. Many people are going to be in for a surprise when tax filing season arrives.
Second, the benchmark “silver” plan upon which subsidies are based is changing in most states, with new, lower-cost entries trying to gain market share by undercutting the previous benchmark plan. Meanwhile, the old benchmark plans are raising premiums because they weren’t getting a good return on investment or even taking losses.
For those who are auto-enrolled, this will mean reduced subsidies for plans that are now more expensive. The end result: Many low-income Americans are going to be hit with much higher out-of-pocket premiums, as much as $100 a month more in some cases.
Then there is another looming assault on the bank accounts of low-income Americans with coverage through the exchange. According to The New York Times, the administration has decided it won’t notify insurers when people drop them and select a new insurer.
This has disaster written all over it. Insurers generally bill their policyholders until told coverage has been dropped, and they’ll continue to deduct premiums automatically from the bank accounts of policyholders who selected that auto-pay option. Policyholders will be paying for both the old and new policies until it gets straightened out.
The federal government says not to worry; it’ll send a file in mid-December letting insurers know who has signed up for coverage with them through the exchange, and they should just cancel everyone else’s plan effective December 31.
This should comfort exactly no one who is even remotely familiar with the ongoing problems with data transfers between the federal government and insurers.
On top of all that, Obamacare makes it difficult for insurers to cancel policies. It is not hard to foresee mass cancellations triggering a field day for consumer advocates, trial lawyers, and politicians eager for camera time excoriating insurance companies for cancelling plans.
It’s difficult to untangle the complex web of incompetence, indifference, and ignorance that has surrounded the crafting and implementation of Obamacare. Sadly, it’s not difficult to predict we’ve seen only the tip of the iceberg of havoc Obamacare has smashed into our health care system.