On the banning of Inferior Insurance Plans

Last edited Tue Nov 12, 2013, 06:22 PM - Edit history (3)

I suspect that the abolition of non-standard insurance plans should have been phased in over one or two years, though at this juncture it cannot sensibly be changed.

If you are making something better available it is unwise to simultaneously abolish inferior options unless it is absolutely necessary.

Doing so eliminates competition, and results arrived at through competition are sturdier and more sustainable. Not more virtuous, but sturdier than dictated outcomes. Things people learn themselves are better learned and decisions people make themselves are more popular. (And the existence of the station with $3.75 gas is nessecary to the station with $3.50 gas looking so good.)

The idea of Obamacare, vis-a-vis the individual market, is to create a set of incentives that will make everyone choose to be insured. There is the carrot of affordability and the stick of the individual mandate. These are thought to be sufficient to motivate people with NO PLAN to get a STANDARD PLAN.

If they are sufficient to do that then they should certainly be sufficient to motivate people with a SUB-STANDARD PLAN to get a STANDARD PLAN.

That is a much smaller leap. It should be easier for the carrot and stick to get someone already paying for coverage to opt for better coverage than to get someone entirely out of the system to begin paying something for insurance.

The right move was probably to simply categorize sub-standard plans as non-coverage. People with sub-standard plans would be in the same position as people with no plans, wide the added incentive that they are paying out money for something and still facing the mandate penalty—a defacto cost increase in the big picture.


So, given their incentives, most of them would choose (over a year or two) to upgrade to a standard plan and thereby save themselves money.

All arguments for the ban say that the move from sub-standard to exchange standard is a no-brainer... a decision so clearly advantageous that it's automatic. If that is the case then the argument for allowing it to be a voluntary choice for a year or two is also a no-brainer.

Almsot everyone would make the move voluntarily out of percived self-interest and would congratulate themselves for their wisdom and think highly of the process.

But when the government abolishes something while promising the replacement will be better is causes discontent. And loony right-wing discontent counts! This is policy for America, not for Democrats. The psychology of right-wingers is part of aggregate American psychology and the ACA seek everyone being covered, including tea-baggers.

even sane people like to have the two options side-by-side and then choose the better one.

The alternative is the roll-out of New Coke. Was new Coke "better"? We will never know. What it was was distinctly different and dictated, and that rubs people the wrong way.

Thousands of people in focus groups costing millions of dollars, in blind taste-testing, had preferred the New Coke. So Coke assumed that people would prefer it. But the roll-out was doomed to fail because it involved taking something away. People could taste the difference and nobody asked them whether they wanted the change and they could not get the old Coke. People with no previous ill will toward Coca-Cola were ready to riot over a soft-drink flavor.

Perhaps if the two were offered side-by-side a lot of people might have preferred new Coke and switched to it, but when something is taken away we have a visceral reaction. Take a toy from a child who is not playing with the toy and see how that toy suddenly becomes the most desirable thing in the world.


The whole thing was an unforced error. If the canceled plans were as horrible as everyone says then it should have been easy to attract people to standard plans (with the added benefit of compliance with the mandate)


Public policy always has a political component. Policy typically works better when it avoids unnecessary friction with human psychology.

And to entirely disregard widespread skepticism of the government saying, "Here, This is better. Trust me," overlooks the reality of American government. Not all such skepticism is wing-nuttery. Most people are not rabid partisans and perceive the government as the government, not as a Party. And the government of the USA told these people we needed to invade Iraq for our own good. Distrust of the government is natural and desirable in a democracy and is a psychological reality with which policy makers are supposed to work.