I was speaking with people when the president made an announcement concerning a temporary fix to the now troubled Affordable Care Act (ACA) aka Obamacare.
When the press conference finished a few inferred from the speech that “Well, guess that fixes things for now.” Personally I was shocked by the reaction because from my point of view. Not only did it not fix anything. I believe it just made a bad situation worse. Let me explain as I did to the others.
(Please save the emails. This has nothing to do about a person, political side, or anything else. It’s about understanding business and its implications.)
What’s currently front and center of the ongoing debate aside from the debacle of the web site roll out is the promise: “If you like your policy – you can keep it.”
As its been reported everywhere, millions of subscribers have been notified their former policies have been cancelled. It doesn’t matter if you feel this is right or wrong. It is what it is. According to the ACA rules and regulations. Those policies could no longer exist as products for sale. Not that they shouldn’t continue selling them. It became illegal when the ACA took effect.
That is such a critical distinction to understand than the idea of “just discontinuing.” Why? Because if you can not continue participating in a business structure or market because it’s no longer legal, not just because of a profit motive or any other reason. The first thing any prudent company will do is to get rid of any and all infrastructure pertaining to that old and now illegal business model.
What many forget is the mandate to discontinue offering such policies was told to the marketplace 3 1/2 years ago. It was then stated that this will be the new law and to adjust or discontinue. So, as businesses will do, they began making the necessary changes.
This is not an insignificant point. The healthcare industry is by some reports 1/6 of the total US economy. For 3 1/2 years you have had nearly $3,000,000,000,000.00 (3 Trillion) per year of yearly market infrastructure moving, adjusting, shrinking, growing, and more all behind the scenes. Never-mind the other parts of the economy that has been impacted and making changes accordingly. i.e., People being reduced to part-time, cutting staff to not hit the 50 employee mark, and more.
The reasons for these changes is because of changes in law. Not market conditions. Changes based on changes in law have far more reaching or permanent implications than plain market conditions. Market conditions allow trials at making something unprofitable profitable. Again, if possible or if one is so daring. Law – means done. There is nothing further to try – it’s illegal now, don’t waste anymore time, money, or any other resources. Period.
Why this distinction in understanding is so important is because many (especially some entrepreneurs which surprised me) think the president’s suggestion that one might be able to continue with ones former plan for another year would take some pressure off of people.
Not only do I feel this is ludicrous. I also believe It can’t be done as suggested. This is not some “flick of a switch” or “just pull the files out of the recycle bins” and say..“No Prob – just send in your check.” It’s far, far, far, (did I say far?) more complicated. Let me express what I’m trying to convey using this analogy:
Imagine if a new law was introduced and passed that would make the production of bacon using smokehouses or smoke was now illegal. From now on the new law would make it both illegal to make or sell bacon produced in or used via the smoking method.
Only bacon made through the chemical process of injecting the flavoring liquid smoke would now be acceptable. By law. However, companies and consumers would have 3 1/2 years to get ready to comply with the new mandates. What do you think bacon producers are going to begin doing?
Immediately changes would be implemented to reduce stockpiles of supplies and more not needed for the production used in smoking. People that manned the ovens would be put on notice their jobs would be discontinued. Others would immediately begin the process for dismantlement of ovens, smokehouses, and their facilities. Then followed with the selling of real estate, equipment, or more. The specialized equipment used would be either sold or scrapped.
You as a consumer may not even notice all this behind the scenes disruption because stores are still carrying the bacon you now and love. However as the supplies get reduced it still might go by almost unnoticed because if it’s not at one store you can still find some at another.
This will go on until on one fateful day, 3 1/2 years later the law takes effect. Your bacon? Gone. Now it’s not only no longer for sale – any left is thrown into the garbage. Now it’s illegal to produce, sell, or consume. Again – by law.
In an uproar from consumers a decision is made to rescind the mandate for another year till people find a better bacon substitute. Sounds great at first blush. However, the smoke houses, and all the other infrastructure that was used to process the now illegal bacon is gone. And no one, no company, no corporation, no sane entrepreneur would try as to put the infrastructure needed for such a complex product back together along with the monetary investments needed to produce for 1 year. (If you don’t think the process of making bacon is complex, you never worked under USDA inspection.)
Insurance is no different to this analogy. People, infrastructure, real estate, and more have been radically changed over the last 3 1/2 years. New companies have begun in anticipation one product would be no longer available. Others have reduced their staff because they would no longer be able to offer their former products. Doctors, hospitals, and more have changed staffing based on accepting or not accepting new or old services. The list is near endless. Remember – this is 1/6 of the total US economy that has been disrupted. Not just a product offering.
Again this has been taking place over the last 3 1/2 years. It would take that long if not longer as to just try to reinstate things back 50%. But (and it’s a very big but) to make changes of reversion that would be cancelled 12 months later again? Not a chance.
The only good thing out of the above we can take away for now is…
They left bacon alone – at least for now.
© 2013 Mark St.Cyr