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The Obamacare Exchange Will Stay Open Today. Here's Why

Getty Images: Joe Raedle

Attention last-minute Obamacare shoppers: You just got a little extra time to buy insurance for the new year.

The deadline was supposed to be midnight on Monday. But as first reported by Amy Goldstein and Juliet Eilperin of the Washington Post, and since confirmed by officials at the Department of Health and Human Services, over the weekend administration officials and government contractors quietly made a programming change to the federally run insurance website. Now the actual deadline on Tuesday. Administration officials aren't suggesting people take the extra time. But for those people who can't complete the process by Monday night, there's now an extra grace period that runs through Christmas Eve.

Yes, Wal-Mart will be closed and Santa will be on his way. But as long as you complete your insurance enrollment by midnight, the elves at will be there to take it.

You could argue this sounds like common sense. (Why not give procrastinators a few extra hours to finish the process?) You could argue this sounds like panicky improvisation. (Were officials worried a last-minute rush would overwhelm the system?) Probably both arguments contain some truth. Either way, the people for whom the change matters most are the ones who have insurance plans expiring at the end of the year—and have yet to pick a replacement. 

Nobody knows for sure how many fall into that category, but the administration reckons it’s about half a million. Some are waiting until the last minute to make up their minds. Others have been shopping for insurance, via the new exchanges or on their own, and simply don’t like their options. They’ll have to pay higher premiums, make do with limited provider choice, accept less generous coverage, or some combination of those.

A well-researched story in the New York Times over the weekend offered a glimpse at some of these people. A sizable chunk are people whose incomes amount to more than four times the poverty line. That’s about $46,000 a year for an individual and $94,000 a year for a family of four. It’s the cutoff for federal subsidies—if you make more than that, you’re not eligible for Obamacare’s tax credits and you have to pay the full sticker price of insurance. The Times article starts with a family of four, in New Hampshire, with income of around $100,000. They used to pay about $8,000 a year for insurance. Now they’ll have to pay about $12,000.

By now, this story should sound a little familiar. It’s the rate shock story that’s gotten tons of attention ever since those policy cancellation notes went out. The number of people paying more for coverage may be smaller than the number paying less. And some of them may actually benefit in the long run—because, for example, they'll have better financial protection if they get really sick. Still, there’s no question that some people are going to end up paying higher premiums or getting worse coverage or both. They’re not happy about it and it’s easy to see why.

But the Times did a nice job of highlighting what makes this particular issue so complicated, as policy and as politics. Look again at the insurance coverage that New Hampshire family has to buy. It will cost them $12,000 a year. Relative to what employer plans cost, that’s not particularly expensive. In fact, it’s dirt cheap! According to the annual Kaiser Family Foundation/Health Research & Educational Trust (HRET) survey, annual premiums for an employer-sponsored family policy were more than $16,000 a year in 2013. The comparison isn't perfect, because employer policies are traditionally more generous than individually purchased policies. A major goal of Obamacare is to raise the standards of those individual policies, so that they provide the same level of access and protection that employer policies do. But it’s telling that, even with the upgrades, the new Obamacare policies still cost a lot less than employer policies.

Of course, if you have insurance from your employer, you probably have no idea how much it really costs. All you know about is the “employee share”—the part that your employer deducts explicitly from your paycheck. Typically it's about $4,500, according to the Kaiser/HRET survey. But your employer is still paying the rest of that premium. And that money, or some large portion of it, is also coming out of your pockets. Dean Baker, co-director of the Center for Economic and Policy Research, explains, why:

Most economists would say that we should treat the employers payment as a cost to the worker since in general employers are no more happy to pay money to health insurance companies than to their workers. If they didn't pay this money as health insurance then they would be paying it to their workers in wages. If they didn't pay this money as health insurance then they would be paying it to their workers in wages.

Yes, this is why nobody likes economists. But they have a point here. And it shows you why health care reform is so difficult. A major goal of Obamacare is to make sure people buying coverage on their own have access to the same kind of plans that large employers make available. But that means paying the same kinds of prices that large employers pay for their policies. The law shields poor and most middle-class people from the full price, by providing tax credits worth thousands of dollars a year to some people. But the law doesn’t shield everybody. Some people have to pay full price.

It would be great to shield even more people from the full price of insurance, which is why some of us always argued—and still argue—that the subsidies should be even more generous and available to even more people. (Single-payer reforms could do the job, too.) But that would require putting a greater financial burden on either the wealthy or the medical industry, in order to offset the extra cost of all those new subsidies. At the moment, there is no political support for that.

Faced with that reality, lawmakers have two options. One is to ease the transition to the new system—say, by giving more existing plans grandfather protection or allowing people facing price hikes to buy slightly cheaper policies with slightly fewer benefits. That’s basically the approach the administration has taken, with all of these last-minute changes to the law. It’s not pretty and it won’t solve the problem. But it will ease the new burden on a few people.

The other approach is to junk the parts of Obamacare that make non-group insurance more comprehensive and available to all people, regardless of health risk. This is the approach many conservatives favor. Doing that would certainly put an end to rate shock. But it would also mean restoring the status quo in which people with pre-existing conditions couldn’t get decent coverage and more people with insurance had crippling medical costs.

Families like the one in New Hampshire could keep their old policies. But people without decent insurance would remain out of luck. It’d be nice if those trade-offs didn’t exist. But they do.

Update: Just a reminder that states running their own Obamacare websites—California, Kentucky, Rhode Island, and several others—have different deadlines. Jeffrey Young of the Huffington Post has all the essential information.