John C. Goodman

So why has it taken so long for the mainstream media and the general public to wake up to what is going on. I think there are three reasons: (a) insurance industry executives (who knew what was going on) were threatened and bullied into silence by the Obama administration, (b) the health policy community (who also knew what was going on) abandoned their role as critical analysts and assumed the role of cheerleaders for the new law instead and (c) the health care media (who should have known what was going on) didn't do its job.

Before going forward, let's put to rest a claim now being made by President Obama and Valerie Jarrett: that the insurance cancellations are the fault of the insurance companies, not the administration. It was the administration (through its own regulations) that made it virtually impossible for most individually owned insurance to be grandfathered. As The Washington Post explains:

The law did allow "grandfathered" plans — for people who had obtained their insurance before the law was signed on March 23, 2010 — to escape this requirement and some other aspects of the law. But the regulations written by HHS while implementing the law set some tough guidelines, so that if an insurance company makes changes to a plan's benefits or how much members pay through premiums, co-pays or deductibles, then a person's plan likely loses that status.

If you dig into the regulations (go to page 34560), you will see that HHS wrote them extremely tight. One provision says that if co-payment increases by more than $5, plus medical cost of inflation, then the plan can no longer be grandfathered. (With last year's inflation rate of 4 percent, that means the co-pay could not increase by more than $5.20.) Another provision says the co-insurance rate could not be increased at all above the level it was on March 23, 2010.

Even before these regulation were promulgated, no serious policy analyst ever thought that more than a handful of plans would be grandfathered for very long — not the Congressional Budget Office, not the health committees on Capitol Hill, not the specialists in the private sector, not anyone. But with Obama's repeated assurances that no one had anything to worry about, with a compliant health care media and with a cheerleading health policy community, the general public has remained completely in the dark — until now.

As for premiums, every analyst knows that if you force insurers to charge everyone the same premium (ignoring differences in health care status), premiums will go up for the vast majority of policy holders so that they can go down for the most expensive enrollees. As Megan McArdle explains:

It's absolutely true that every policy wonk who was writing or speaking about the law in 2009 and 2010 understood that it would mean premiums going up for at least some people, many of whom would lose insurance that they would have preferred to keep…They had to; mathematically, it was not possible for coverage to expand and everyone's premiums to go down — not unless you spent more in premium subsidies than the government could afford.

Everyone knew this — except ordinary folks. They received the opposite message. Going all the way back to the 2008 campaign, candidate Obama told everyone their premiums would actually go down! See this Q&A from the 2008 Obama campaign (Another HT: to Megan).

As for the president himself, he is a complete enigma to me. I've never felt that I understood him. He appears to have looked directly into the TV camera and said something that was blatantly untrue (in the words of Joe Scarborough) "over and over and over and over again." You have to go all the way back to Richard Nixon to find something comparable.

Or is it possible the president really didn't know? He often appears very detached and he spends a lot of time on the golf course — even when critical issues are pending.

I report. You decide.

John C. Goodman

John C. Goodman is President of the Goodman Institute and Senior Fellow at The Independent Institute. His books include the widely acclaimed A Better Choice: Healthcare Solutions for America and the award-winning Priceless: Curing the Healthcare Crisis. The Wall Street Journal and National Journal, among other media, have called him the "Father of Health Savings Accounts.”