THE BLOG
12/20/2013 11:59 am ET | Updated Feb 19, 2014

A Condemnation of Catastrophic Coverage for All

Late Thursday evening the White House announced that any Americans who have been dropped by their insurance providers will now have the option to choose not to sign up within the exchanges. Responding with a rule change called the "hardship exception," the Department of Health and Human Services answered six Democratic Senators, who pushed the department to resolve the issue of policy holder cancellations, with a resolution. Evidently, it appears that progress has finally been made to reconcile the frustration experienced by those with cancelled plans by offering them the choice to enroll in "catastrophic coverage."

Catastrophic coverage was initially intended for persons under the age of 30 who were previously not as engaged or motivated to participate in the health care market. It provides bare-bones insurance for young people, costing less, while increasing their purchasing incentive. However, due to the hardship exception, now that there is an inducement to legally sidestep the Affordable Care Act's initial intentions of providing expansive coverage packages, which can be more costly in some cases, there may be no stopping the public from acting on a large-scale to abandon the plans that were signed up for recently on the exchanges in response to receiving news of existing policy cancellations.

The only way that individuals can opt-out of the individual mandate is if they can connect the expensive nature of plans available to them with the proof of cancellations of their previously existing policies.

Unfortunately, it is difficult to claim that an insurer dropped an individual's coverage merely "because of Obamacare." Therefore, there must be something amiss within the internal operations of the insurance business. If these companies were so virtuous and deserving of the public defense and loyalty they sometimes receive, then the plans already would have conformed in unison with public opinion before 2010.

This means that those plans that were written before the enactment of the Affordable Care Act which do not meet its criteria must be cancelled - there is no alternative. Otherwise, the insurance company is illegally conducting business. This illegality alone explains the recent drops of coverage for millions of Americans.

The blame can be attributed to President Obama - and rightly so. The President signed the law, advocated for its passage and campaigned on its promises. He should be the natural scapegoat. And he is. The President has led the move during the highest times of positive publicity through the worst criticisms he has ever faced, and has even publicly declared "I completely understand how upsetting this could be for a lot of Americans, particularly after assurances they heard from me."

Although it is clearly Obama's fault for the cancellation of policies since those policies would be classified as unlawful due to his healthcare law, this should evince that while the instigator and lead-perpetrator is the President, the group to blame is the conglomeration of those reprehensible insurance companies which disseminated scanty plans in the first place.

The fact that Obamacare limits the profitability of big-time insurance corporations by regulating the medical loss ratio signifies that there is a saving grace for the President's image should he choose to ever publicize it and expose insurance companies. The medical loss ratio is a representation of the amount of money spent explicitly on medical expenses opposed to administrative costs. The Affordable Care Act mandates that insurance companies maintain a medical loss ratio of no more than 20%, meaning that at least 80% of a premium must fulfill the medical expenses of the client. The intent to reduce overhead costs is a way of making the healthcare system more efficient - ensuring that more of the money from individuals' premiums actually goes toward health expenses and not administrative costs for companies.

The medical loss ratio modification would be unnecessary if insurance companies played fairly across the board and offered more to the insuree than to the insurer. Nevertheless, this partition of the healthcare law is necessary and advantageous to all Americans and shows the President is more interested in providing for the people than for multimillion-dollar corporations.

Allowing people whose plans have been cancelled to receive special treatment is both an economic and moral mistake.

When millions of people revoke their brand new policies in favor of bare-bones coverage because their initial plans were cancelled, severe economic distress will occur. The feast on cheap health care plans will cause healthy people who purchased new plans to pay more in order to compensate for the loss of revenue gained from the lowered premiums of the bare-bones plans.

The moral fault is that people will retreat from their new, all-inclusive plans, to those with minimal coverage - something that was intended for younger people under thirty years of age to assist them with getting started with health insurance. Widespread catastrophic coverage will detract from the original promise of Obamacare - making the efforts of the last three years obsolete and threatening a return to insurance company domination and regulation at the expense of the uninsured.

If hardship exceptions are not monitored and limited, catastrophic coverage could become the new standard for any person who has had a plan cancelled on him or her. The unbalanced appropriation of the poor to the bare-bones plans and the middle-class or higher to more inclusive and expansive plans will cause premium spikes and mass last-minute cancellations across the country. A national disaster could be on the verge of the hypothetical and imminent reality.