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The Same, Only More So

yard sign advertising HealthCare.gov, obscured by tall grass
photo by Paul Sableman

November is almost here. For many Americans, that means it’s time to pick one of the ever-more expensive options in an ever-shrinking pool of choices.

Welcome to health insurance open enrollment season.

While HealthCare.gov doesn’t open until November 1, consumers can already browse insurers’ offerings. Or, in some cases, the offerings of an ‘insurer,’ singular; more than one in five Americans using the federal marketplace will only have access to one insurance provider on the exchanges this year, according to the Department of Health and Human Services.

Even for those who can shop around, the picture is still grim. Earlier this week, HHS issued a report that noted monthly premiums for benchmark silver-level plans will rise by an average of 25 percent in the 38 states participating in the federal marketplace. A report from the Kaiser Family Foundation, also out this week, noted that the increase was even sharper in certain areas of the country, with benchmark plans in Philadelphia, Minneapolis and Oklahoma City all rising more than 50 percent. Phoenix, Arizona’s monthly premiums for a 40-year-old nonsmoker are up 145 percent. While this is clearly an outlier, it is a sobering one.

For 84 percent of consumers buying their insurance through the exchanges, these price jumps will be offset by subsidies. And a slice of the remaining 16 percent may find themselves newly eligible for such help when they were not previously. Everyone else using the exchanges, along with millions who buy individual policies off the exchanges through brokers or on their own, must deal with paying the higher premiums, changing plans or dropping their insurance altogether and facing the penalty. That is assuming the insured’s current plan still exists at all; for those whose plans are discontinued, either because their insurer shut down or pulled out of their market, only the latter two options are available.

Despite these numbers, or in some sense because of them, the administration has found a way to double down on the Affordable Care Act’s original sin: allowing people to sign up for new insurance after they get sick.

The Wall Street Journal reported that for many Americans, open enrollment’s Dec. 15 deadline is really more of a suggestion. If your current plan is being discontinued next year, you will be eligible for a special enrollment period that extends from Nov. 1 to Dec. 31. But wait – there’s more. Some individuals who miss that deadline may be able to sign up for coverage as late as March 1, though the Journal notes this would involve a lapse in coverage.

This grace period could easily create situations that illuminate the foundational problem with the Affordable Care Act. Say Jane is a relatively young and healthy person who makes too much to receive subsidies and whose former insurer decided to stop offering plans on the exchanges for 2017. If Jane can’t find a plan that lets her keep her doctor at a reasonable rate, she might decide to risk going without coverage and covering her minimal care out-of-pocket for the time being. But then Jane discovers in February that she is seriously ill and rushes to sign up for insurance, which will take effect March 1.

This form of adverse selection – in which healthy people choose to risk going uninsured unless and until they get sick – is exactly why insurance rates are soaring.

The Obamacare “death spiral” is clearly well underway, masked partially by the fact that open-ended federal subsidies allow many people on the exchanges to keep buying the increasingly expensive insurance. Unsurprisingly, nobody has said exactly how much these subsidies are costing, especially compared to more optimistic initial projections. Whatever that number is, it isn’t small; the HHS report noted that 72 percent of Marketplace customers are expected to pay $100 per month or less after subsidies.

Even then, the limited benefits many plans offer in the form of high deductibles and co-payments and limited service networks are discouraging many eligible participants. Signups on the exchanges are only about half of what was originally expected.

The administration are adding one more “helpful” tweak to the Marketplace this year. If your old ACA plan has been discontinued, most often because your old insurer has pulled out of your local market, the exchange will automatically assign you a new plan that it thinks is closest to your old policy. The terms may be different – “closest” isn’t “identical” – and even if the terms are largely the same, the doctors and facilities you use that were covered under your old insurer’s network may not be included in your new one. There is no obligation to pick the new plan, of course, but given the headache of shopping for insurance, at least some consumers are going to take the close-enough choice without fully understanding the changes to their coverage. A lot of people will likely discover these differences only after they seek treatment in 2017. This is going to make the Affordable Care Act even less popular next year.

But by then Obama will be out of office and the mess will be deposited in the laps of his successor and Congress.

Larry M. Elkin is the founder and president of Palisades Hudson, and is based out of Palisades Hudson’s Fort Lauderdale, Florida headquarters. He wrote several of the chapters in the firm’s recently updated book, The High Achiever’s Guide To Wealth. His contributions include Chapter 1, “Anyone Can Achieve Wealth,” and Chapter 19, “Assisting Aging Parents.” Larry was also among the authors of the firm’s previous book Looking Ahead: Life, Family, Wealth and Business After 55.

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