Daily Ticker

Obamacare Deadline Delayed; Beware the “Insurance Death Spiral” Says Josh Barro

Daily Ticker

Glitches and tech problems that are plaguing the healthcare.gov website could lead to additional Obamacare delays.

Josh Barro, politics editor at Business Insider, tells The Daily Ticker, "The government needs to get the website up and running as soon as possible." If it doesn't and only the sickest Americans sign up--because younger and healthier individuals don't--there could be an "insurance death spiral," says Barro.

He explains: "If only people who are especially sick buy health insurance, then you end up with a pool of people who are really expensive to cover, so insurers have to respond to that by raising premiums. Then more people drop out of insurance because it gets more expensive and you have a death spiral where only extremely sick people paying extremely higher premiums are in the insurance market."

Related: Obamacare: Separating Truth from Fiction - Here's What You Need to Know

Obamacare includes an individual mandate in order to have enough healthy people in the program so that premiums are affordable and such death spirals are avoided. Individuals who don't sign up will be charged a penalty that increases every year through 2016. But even here there is confusion.

Let me explain, and please be patient (no pun intended):

Open enrollment for Obamacare began Oct 1 and ends March 31. Individuals who don't have coverage by the end of that period are subject to penalties.

Based on a common reading of the law, in order meet the March 31 deadline individuals have to be enrolled for coverage starting March 1. And in order to qualify for that, they have to be signed up by February 15. Still with me?

Related: Gullible Americans Fuel Obamacare's Bad Rap

Here's the wording at the healthcare.gov website which underlies that interpretation:

.... if you enroll between the 1st and 15th day of the month and pay your premium, your coverage begins the first day of the next month. So if you enroll on February 10, 2014, your coverage begins March 1, 2014.

If you enroll between the 16th and the last day of the month and pay your premium, your effective date of coverage will be the first day of the second following month. So if you enroll on February 16, 2014, your coverage starts on April 1, 2014. [and April 1 is after March 31]

But now, the White House is saying the deadline to avoid penalties was never mid-February but March 31: "If you sign up for insurance by the end of March, you will not face a penalty,"' the White House said late Wednesday. Even March 31 may be too soon given the problems with the website, which prevents people from signing up.

"It's possible we'll see a longer delay, but that decision doesn't have to be made right now, " says Barro. "We can see how well the website is working at Thanksgiving, in December and January. The administration will be able to make calls at that time as to how far it needs to be delayed."

The administration could decide, for example, that "everybody is subject to a hardship because it's been so difficult to buy insurance" and delay the penalty deadline based on such a hardship, which the law allows, says Barro.

Related: Obamacare: Worst Law Passed in Four Decades Must be Stopped, Says Stockman

In the meantime, Democratc Senator Joe Manchin of West Virginia is reportedly already drafting a bill to delay the mandate for a year, his spokesman said. And Sen. Jeanne Shaheen (D-NH) has also called for an extension of the open enrollment period to allow people more time to purchase coverage.

Still confused? Watch the video above. It can only help.

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