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HHS extends 'fix' for plans cancelled due to Obamacare through October 2016, alters bailout to insurers

In an attempt to limit the disruption to the insurance industry, the Department of Health and Human Services announced that the “risk corridorâ€ï¿½ program would be further modified to funnel more money to insurers in states affected by changes to the Affordable Care Act. (Thinkstock)

A supposedly temporary “fix” that President Obama announced in November to address the problem of the millions of Americans who lost coverage as a result of his health care law has now been extended through Oct. 1, 2016, the Department of Health and Human Services announced Wednesday.

In an attempt to limit the disruption to the insurance industry that would be caused by the move, HHS also announced that the “risk corridor” program (which has been described as a “bailout” to insurers) would be further modified to funnel more money to insurers in states affected by the change.

The move, which the Hill reported on earlier this week, comes as vulnerable Democrats are struggling to defend their support for Obamacare in a midterm election year.

It is just the latest in a series of changes that the Obama administration has made to the president's law without going through Congress.

It also severely undercuts the premise of the health care law in key ways.

At the heart of the issue is the fact that over the course of several years, Obama repeatedly assured Americans that those who liked their plans would be able to keep them under his health care law. In the fall of 2013, amid a public outcry after millions of Americans received insurance cancellation notices because their policies did not meet the requirements of the Obama administration, Obama said he would allow states to simply not enforce the rules in his own law.

As legal scholars questioned this use of “enforcement discretion,” insurers noted that the arbitrary change could rock the insurance markets. Insurers were depending on a flood of more healthy customers transitioning to new plans on the law's health insurance exchanges when they set premiums - Obama's move changed things.

More than 20 states - many of the states that backed the new insurance requirements that Obama decided to undermine - decided not to implement Obama's fix.

To address the concerns of insurers, the Obama administration also announced a move to funnel additional money to insurers in the affected states through the “risk corridor” program. The administration claims that the program will be budget-neutral because payments will be based on the percentage of legacy health care plans that exist in each state.

Looking at the issue more broadly, the change undermines a central rationale for Obama’s health care law.

Obama and his allies long-defended the outlawing of certain health care plans, arguing that they were substandard. And they argued that depriving people of the ability to purchase such plans was essential to making the health care law work. If young and healthy people can purchase cheap health insurance with fewer benefits, they argue, it would make coverage more expensive for older and sicker Americans.

Now, not only is Obama saying that these legacy plans can remain, but he's saying they can stay alive for three years longer than intended. If they can be extended for three years, the new rules may never fully go into effect (unless Obama will allow a wave of cancellations in October 2016, just before the presidential election). And maintaining these plans will further drive up the cost of insurance on the exchanges.

It’s hard to see how this two-tiered health care system can sustain itself. Obama is saying that some individuals get to keep their old, cheaper and better health insurance plans. But other individuals are forced into an increasingly expensive insurance market.