The Obamacare Delay That Wasn't

Here are the important Obamacare dates highlighted on Healthcare.gov, the government's health insurance marketplace website:

Source: Healthcare.gov 

Based on those dates, when would you expect to have to sign up for health insurance to avoid the penalty under the Affordable Care Act, commonly known as Obamacare? If you guessed March 31, you'd be completely wrong.

Until now.

The ACA says you need to have insurance in effect by March 31, but the coverage starts on the first day of the month after you enroll if you enroll between the first and the fifteenth day of the month. If you enroll on the sixteenth to the end of the month, your coverage doesn't actually start until the first day of the second subsequent month.

Under the strict reading of the ACA, you actually had to sign up for insurance by Feb. 15 so your insurance would start on March 1 and you'd be covered on the March 31 deadline. If you waited until Feb. 16, coverage wouldn't kick in until April 1, after the deadline. Wait until March 31 and you won't actually have coverage until May 1.

Confusing? The White House thought so and announced this week that it wouldn't penalize anyone that signed up for insurance by the end of March. The Presidential Office claims that it's not really delaying anything, but rather interpreting the law as it was intended.

Monetary effect
In theory, this is bad news for WellPoint (NYSE: WLP  ) , Cigna (NYSE: CI  ) , Aetna (NYSE: AET  ) , and the rest of the insurers participating in the exchange. It seems safe to assume the sickest patients will enroll early to get coverage on Jan. 1 while relatively healthy people that had gone without insurance will wait as long as possible to avoid paying the bill for a few months.

For Obamacare to work and keep health insurance costs in check, the insurers need the relatively healthy people to balance out the unhealthy ones. Even if insurers guessed correctly on the final makeup of the insurance pool, it seems likely they may lose money during the first couple of months, paying out more than the premiums can cover.

Of course, smart insurers will have factored in the delayed enrollment by healthy individuals. And really smart insurers -- or perhaps ones that were as confused as the general population -- may have determined their premium prices based on healthy individuals enrolling close to March 31, so the delayed enforcement may have very little effect on insurers' profits in reality.

An actual delay, on the other hand...
Republicans have been pushing for a delay. In case you've forgotten, it's the reason they shutdown the government. And now a few Senate Democrats have broken rank, encouraging President Obama to extend the open enrollment period.

While having more time to enroll in the program would seem to be beneficial, especially if website issues continue, there's a reason that you can't enroll in the program year round. Healthy people would just wait until they got sick and then sign up for insurance. That trick wouldn't work with immediate emergencies, but the uninsured are already gambling that they won't have them under the current system. If patients wait for newly diagnosed chronic conditions, insurers would get stuck with the bill even though the patients didn't pay into the system when they were healthy. Under the current insurance system, people can enroll anytime, but the insurers can deny coverage for preexisting conditions.

As I've been saying for years, the individual mandate and the coverage of preexisting conditions are intertwined. There's no way to have one without the other. Delaying Obamacare would require the government to allow WellPoint, Cigna, Aetna, and the rest of the insurers to go back to denying preexisting conditions.

How likely do you think people are going to let that happen?

How will Obamacare affect you?
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Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On October 26, 2013, at 1:45 PM, FoolishRick wrote:

    One thing I LOVE about The Motley Fool is that it is perhaps the only place that actually posts articles about the Affordable Care Act that are factual, useful, and - best of all - completely hysteria-free! Thank you, Fools, for bucking the trend of internet idiocy and bypassing the hysterical ObamaHate, the lies, the partisanship, and the deliberate misinformation that infects EVERY aspect of ACA discussions and, instead, being a bright spot for serious information gathering. Folks need to take a "chill pill", read more about the ACA on The Motley Fool, and start improving their OWN health by lowering their blood pressure.

  • Report this Comment On October 26, 2013, at 3:08 PM, quacker wrote:

    and now being reported that insurance companies are setting record profits for the 4th quarter.ever have a government order you to pay a profit to a company before? thanks obama the insurance sells man

  • Report this Comment On October 26, 2013, at 5:46 PM, boatassembler wrote:

    Don't worry about March 31. If they cannot get the website fixed soon, Obamacare will be on life support ,if not already dead, from the weight of it's own failures.

  • Report this Comment On October 26, 2013, at 6:29 PM, shineridge wrote:

    To call OBIMBO Care, the "Affordable Care Act" is such an outrageous LIE !!!!!!! There is NOTHING affordable about it. Obammy Care is gonna devastate the economy and BANKRUPT the nation, and DESTROY our health care system. It's going to be an absolute DISASTER. The majority of Americans don't want it. In a country with REPRESENTATIVE Government (which we are supposed to have), things the people DON'T want, are not supposed to be shoved down the peoples throats.Under OBIMBO Care, Americans MUST have health insurance, or the Gov will FINE them. This simply doesn't happen in a FREE country. Period. With Obummer Care, America is now, OFFICIALLY, a damned DICTATORSHIP !! HILE OBIMBO !!!!!!!!!!

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