Another Reason to Scrap Obamacare’s Exchanges

New estimates project Obamacare will leave behind far more uninsured people than originally estimated. The Congressional Budget Office’s March 2010 estimate figured 26 million uninsured in 2015, while the March 2015 estimate figured 35 million uninsured in 2015.

So, Andy Slavitt, the Acting Administrator of the Centers for Medicare & Medicaid Services, recently announced steps to increase enrollment in Obamacare’s exchanges. One solution is counter-intuitive. He will tighten up the open season for enrollment. Because of the administration’s eagerness to enroll as many people as possible, deadlines for the first three open seasons have been moving targets. No more, according to Mr. Slavitt, who suggested that corruption among brokers was a motive:

Last month, we announced the elimination of the tax season special enrollment period; and this week, we will be announcing that we will be eliminating certain other select SEPs and making the language on others clearer to prevent bad actors from signing people up for insurance inappropriately.

The tax season special enrollment period was conjured up because people would do their tax returns in the spring and only to learn they were subject to Obamacare’s penalty for the previous year. So, the administration gave them a break to sign up late for the current year. “Bad actors” likely refers to applicants misrepresenting an event such as divorce or job loss so they could sign up for Obamacare outside open season, if they are diagnosed with expensive illnesses.

A strictly defined and enforced open season is required in Obamacare for the same reason it is required in employer-based group plans: When health insurance is guaranteed issue without underwriting for health status it is an important way to limit people’s ability to wait until they get sick to buy coverage.
Because this has been poorly enforced, potential enrollees have been waiting to get sick. If they do not get sick, they never enroll.

Further, a broker acquaintance of mine reports that at least one insurer has stopped paying commissions for signing people up outside open season. This must be because insurers are aware that agents are acting badly, stretching the truth about applicants’ eligibility for special enrollment.

Why have insurers been unable to enforce enrollment criteria appropriately? Because in order to get Obamacare tax credits, insurers can only sell to applicants who use Obamacare’s exchanges. And the exchanges are government-run operations. They are concerned only with signing up as many people as possible. They do not care whether insurers are unwittingly getting people already diagnosed with expensive illnesses.

Getting rid of Obamacare’s exchanges would greatly reduce this problem.

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For the pivotal alternative to Obamacare, please see Independent Institute’s book, A Better Choice: Healthcare Solutions for America, by John C. Goodman.

John R. Graham is a former Senior Fellow at the Independent Institute.
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