Healthcare.gov Headaches — What You Need to Know

This snafu could have long-lasting effects

     

The worst-case scenario is that problems continue to plague the site for the next six months, which would make it nearly impossible to enforce the “individual mandate” part of the law that begins in 2014. In other words, the Obama administration will not credibly be able to penalize people for failing to buy insurance when they were actually not able to do so. This would put Obama in the awkward position of delaying the individual mandate. However, the part of the law that requires insurance plans to cover everyone, no matter how sick and expensive you are, will remain. This dynamic is known as the “death spiral” — premiums for everyone would rise because the young and healthy did not enter the system and lower the prices. Once premiums rise, the young and healthy will be even less likely to join in the future.

On the other hand, if the system is fixed relatively quickly (optimists are pointing to Thanksgiving as a possibility) much of this hysteria will be forgotten.

No matter what happens with the website, however, the law will only work if enough healthy people sign up for insurance. Obamacare’s marketing team has gone so far as to target the healthy young men that notoriously eschew health insurance. Brosurance, anyone?

The Future of Healthcare Reform

While political operatives may be most interested in how the failure of Healthcare.gov will play out politically, the more important consequences may be felt in future policymaking. One healthcare economist points out that virtually all attempts at healthcare reform have required a similar dynamic: of means-tested, subsidized insurance bought on a competitive market. If this basic idea proves unworkable, it will be back to the drawing board for everyone.

Another observer makes the case that the end result could be a vast expansion of Medicaid and Medicare, leaving a small portion of the population to buy on the open market.

Some on the right have feared (and those on the left have hoped) that this debacle will pave the way for a single payer system. While it’s too early to tell, Bloomberg’s Megan McArdle persuades us that the entrenched interests of the health insurance industry forbid this conclusion. Indeed, Obama invited the CEOs of three major insurance companies (Aetna (AET), Wellpoint (WLP) and Humana (HUM)) to the White House this week. Jay Carney, Obama’s spokesman, assured reporters that the companies were “very important players in this process.”

At the time of publication, Simmons had no positions in the securities mentioned.


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