health insurance

Baldwin Resolution Would Expose Sick Patients to Higher Premiums, Cancelled Coverage, Denied Care

The Senate appears poised to vote soon on a Congressional Review Act resolution sponsored by Sen. Tammy Baldwin (D-WI) that would rescind the Trump administration’s final rule on “short-term limited duration insurance.” Nearly every Senate Democrat has cosponsored the Baldwin resolution because they believe it would protect consumers. It would do exactly the opposite. 

The Baldwin resolution…

Trump’s AHPs Rule: a Generally Lousy Idea that Would Reduce Premiums for Some and Make ObamaCare’s Costs More Transparent

The Trump administration has released its final rule expanding so-called association health plans. The rule would allow many consumers to avoid some of ObamaCare’s unwanted regulatory costs. But the rule also highlights both the destructive power of ObamaCare and Republicans’ utter lack of imagination when it comes to health care.

Coming Soon to a Los Angeles Times Corrections Box Near You

Correction: The article “Trump’s New Insurance Rules Are Panned by Nearly Every Healthcare Group that Submitted Formal Comments” claimed the Trump administration proposes allowing short-term health insurance plans “to turn away sick people.” In fact, federal law already allows short-term plans to turn away sick people, and to our knowledge not even opponents of the administration’s actual proposal have proposed changing that feature. We regret the error.

HHS Can and Should Allow Short-Term Plans to Protect the Sick from Medical Underwriting

If you aren’t paying attention to the debate over short-term health insurance plans, you should. It’s a mixed-up, muddled-up, shook-up world where Republicans are pushing to expand consumer protections, Democrats are fighting to block them, and the public debate has it exactly backward.

In this morning’s Wall Street Journal, I explain:

ObamaCare premiums keep skyrocketing. Rate hikes as high as 91% will hit many consumers just before Election Day. Maryland insurance commissioner Al Redmer warns ObamaCare is in “a death spiral.”

So-called short-term health plans, exempt from ObamaCare’s extensive regulations, are providing relief. Such plans often cost 70% less, offer a broader choice of providers, and free consumers to enroll anytime and purchase only the coverage they need.

But there’s a downside. When enrollees fall ill, either their premiums spike or they lose coverage, leaving an expensive ObamaCare plan as the only alternative. Markets solved that problem decades ago via “renewal guarantees,” which allow enrollees who get sick to keep paying the same premiums as healthy enrollees.

For more than two decades, Congress has consistently tried to prevent sick patients from being to medical underwriting. Yet in 2016, the Obama administration did exactly the opposite. It issued a regulation that exposed enrollees in short-term plans to medical underwriting after they got sick:

In 2016, in an effort to force people into ObamaCare plans, the Obama HHS shortened the maximum duration for short-term plans from a year to three months and banned renewal guarantees. The National Association of Insurance Commissioners complained this reduced consumer protections and exposed the sick to greater risk, including the risk of having no coverage.

The Trump administration has proposed reversing the Obama rule and allowing short-term plans to offer both 12-month terms and renewal guarantees that allow enrollees who get sick to keep paying the same premiums as healthy enrollees (i.e., no more underwriting). Both of these proposals are consumer protections that would protect the sick from medical underwriting and in some cases protect the sick from losing coverage entirely. 

Believe it or not, Democrats are opposing these consumer protections! I am tempted to say their opposition is inexplicable, but it’s all-too explicable. Democrats want to prevent short-term plans from offering these consumer protections because they fear consumers will find short-term plans more attractive than ObamaCare. Democrats are literally trying to stop Republicans from expanding consumer protections because they would rather protect ObamaCare. 

Bad Nudges - Kentucky Medicaid

In their highly influential book describing behavioral economics, Nudge, Richard H. Thaler and Cass R. Sustein devote 2 pages to the notion of “bad nudges.” They describe a “nudge” as any aspect of the choice architecture that alters people’s behavior in a predictable way without forbidding any options or significantly changing their economic incentives. The classic example of a nudge is the decision of an employer to “opt-in” or “opt-out” employees from a 401(k) plan while allowing the employee to reverse that choice; the empirical evidence strongly suggests that opting employees into such plans dramatically raises 401(k) participation. Many parts of the book advocate for more deliberate choice architecture on the part of the government in order to “nudge” individuals in the social planner’s preferred direction.

Thaler and Sunstein provide short discussion and uncompelling examples of bad nudges. They correctly note “In offering supposedly helpful nudges, choice architects may have their own agendas. Those who favor one default rule over another may do so because their own economic interests are at stake.” (p. 239) With respect to nudges by the government, their view is “One question is whether we should worry even more about public choice architects than private choice architects. Maybe so, but we worry about both. On the face of it, it is odd to say that the public architects are always more dangerous than the private ones. After all, managers in the public sector have to answer to voters, and managers in the private sector have as their mandate the job of maximizing profits and share prices, not consumer welfare.”

In my recent work (with Jim Marton and Jeff Talbert), we show how bad nudges by public officials can work in practice through a compelling example from Kentucky. In 2012, Kentucky implemented Medicaid managed care statewide, auto-assigned enrollees to three plans, and allowed switching. This fits in with the “choice architecture” and “nudge” design described by Thaler and Sunstein. One of the three plans – called KY Spirit – was decidedly lower quality than the other two plans, especially in eastern Kentucky. For example, KY Spirit was not able to contract with the dominant health care provider in eastern Kentucky due to unsuccessful rate negotiations. KY Spirit’s difficulties in eastern Kentucky were widely reported in the press, so we would expect there to be greater awareness of differences in MCO provider network quality in that region.

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