Like a general whose panicked troops are ready to flee, president Obama today ordered a tactical retreat to a more defensible position. First there was the dreadful performance of the health exchanges. Then, came the resentment spawned by insurance cancellations. Democratic supporters of the Affordable Care Act, frightened for their political lives and angry on behalf of their constituents, seemed ready to bolt. The House seems certain to pass a bill that effectively repeals the insurance market reforms in the health reform law by permitting insurers indefinitely to continue selling to new customers plans that do not include the Obamacare protections. The prospect was all too real that the Senate would pass a bill only marginally better. A conference committee bill would reach the president’s desk, confronting him with a political Sophie’s choice—he could sign a bill repealing much of his proudest legislative achievement or veto it and risk being overridden.
Either outcome would be damaging both politically and substantively. The glimmer of Democratic political triumph over the debt ceiling and the government closure would turn to dust. Many elements of health reform would be inoperative with no clear course of action open to the administration.
Today’s announcement by the president adroitly performs political jiu jitsu on Obamacare opponents with respect to insurance cancellation. For a period of one year, the president announced, the administration would refrain from enforcing provisions of the Affordable Care Act that bar insurers from continuing to offer substandard plans now in effect. But there is a condition. Insurance companies must inform customers that if they continue with their current plans, they will be foregoing such benefits of Obamacare as free coverage of preventive care and repeal of annual and lifetime limits.
With this step, the president shifts responsibility for cancellation from his health reform law to the now entirely discretionary actions of insurance companies. Moreover, he has given insurers a nasty choice. They can, if they wish, refuse to rescind their cancellations. In that event, they become the villains forcing customers to discontinue their current coverage. Or they can gain their customers’ goodwill by grandfathering current plans. But to enjoy this aura, they must inform their customers at their own expense of the virtues of Obamacare.
The president has thereby given members of his own party a policy position that should prove easy to defend. He has side-stepped the nasty political cul de sac in which he seemed to have put himself with the promise ‘if you like your insurance, you can keep it.’ Whether frightened Democrats will recognize that the president has given them a solid and defensible position remains to be seen.
That said, today’s action carries risks. First, the legality of suspending part of a duly enacted law is questionable. Dubious legality may not, in the end, count for much. Who would or could sue to enforce the suspended rules is unclear. Furthermore, any such legal action would take so much time that the whole matter would probably become moot. By this time next year, the exchanges will be running, tax credits will have been paid, people will be enrolled in Medicaid, and Obamacare will be on its way to becoming a largely accepted feature of the health care landscape.
Second, those likely to choose to continue coverage under the substandard plans that Obamacare would have barred are likely to be those in comparatively good health who selected plans with relatively narrow coverage. To the extent that this adverse selection occurs, those who enroll through the health insurance exchanges will be sicker than average. That will create pressure on states to allow insurance companies to raise prices for plans they will sell in 2014 and, because of increased uncertainty, prices charged in 2015. It is not clear how large such effects will be. But the effects are clearly problematic.
Lastly, undiluted attention will return to the problem-ridden health insurance exchanges. What seemed likely for some time—that some exchanges would work well and others would not—is now a virtual certainty. Congressional opponents of Obamacare who denied the administration adequate funds to run a proper implementation process are at fault. So are those state officials who obstructed implementation. But the ultimate responsibility is that of the federal and state governments. To the extent that the exchanges do not treat would-be customers reasonably well, they will and should be held to account.
Sentiment inside the Beltway has turned sharply against China. There are many issues where the two parties sound more or less the same. Trump and others in the administration seem heavily invested in a ‘get very tough with China’ stance. It’s possible that some Democrats might argue that a decoupling strategy borders on lunacy. But if Trump believes this will play well with his core constituencies as his reelection campaign moves into high gear, he will probably decide to stick with it, if the costs and the collateral damage seem manageable. But that’s a very big if, especially if the downsides of a protracted trade war for both American consumers and for American firms become increasingly apparent.