Reform Update: Delay in individual mandate could prove costly for insurance firms

More lawmakers are pushing for a delay of the healthcare reform law's individual mandate, which could prove extremely problematic for the insurance industry. That's because the entire framework of the law hinges on enticing enough young, healthy consumers to purchase coverage and counterbalance older, sicker customers. The fear is that without the threat of a financial penalty, few young adults will seek coverage on the exchanges.

“The bottom line is that the individual mandate is an integral part of the law that helps ensure that the market is going to be viable and that it's not going to be just the sick people that enroll,” said Cori Uccello, senior health fellow at the American Academy of Actuaries. “Without that provision, the premiums would be higher because the less healthy people would be the ones who would be more motivated to get coverage.”

The latest call for delay came from a group of nine House Democrats who want to put off the individual mandate until at least 90 days after the website has been declared functional by the HHS' inspector general's office. That follows calls by Sen. Joe Manchin (D-W.Va.) and numerous Republicans to delay levying fines on people who don't acquire insurance coverage by the end of March.

If customers enrolled through the insurance exchanges prove more costly than initially projected, it could have a cascading effect that would likely cause insurance firms to push up premiums in future years. That could undermine the cost effectiveness of the entire healthcare system under the ACA.

“They can't up premiums to make up for prior losses, but what they would do is change their assumptions,” Uccello said.

Even some of the less drastic options lawmakers are considering in response to the botched rollout of HealthCare.gov—such as extending the open enrollment past March 31—could cause problems for insurance firms. That's because they would potentially be working with an incomplete portrait of the exchange marketplace as they begin to calculate rates for 2015.

“I think they're already going to have limited information,” Uccello said. “If people don't sign up right away, it's going to mean they're going to have even less information upon which to base their 2015 rates.”

In recent weeks, House Republicans have been pushing the Obama administration to hold a briefing for their caucus on the troubled rollout of the ACA. But when such a briefing was arranged on Wednesday, only 10 to 20 GOP House members showed up, according to Politico. The closed-door session was led by Michael Hash, director of HHS' Office of Health Reform. The few House members present for the briefing indicated that it largely duplicated testimony by HHS Secretary Kathleen Sebelius and CMS Administrator Marilyn Tavenner at congressional hearings this week.

HHS says nearly half of single 18-to 34-year-olds can buy insurance coverage through the federal exchange for less than $50 a month when subsidies are included in the calculation. The analysis issued this week looked at 2.9 million young adults who may be eligible for coverage in the 36 states that did not build their own exchanges. Of those individuals, 1.3 million (46%) would qualify for a “bronze” plan that costs less than $50 per month, while 1.9 million (66%) would be eligible for a plan that costs less than $100 per month.

The nation's largest online seller of health insurance is offering to take over enrollment duties for the federal government while HealthCare.gov gets fixed. EHealth Chairman and CEO Gary Lauer sent a letter to President Barack Obama this week informing him that the Mountain View, Calif., company was prepared to step in and fix the troubled system. “We are ready to help you get this program back on track promptly," Lauer wrote. According to the Los Angeles Times, Lauer has not received a response from the Obama administration.

Follow Paul Demko on Twitter: @MHpdemko