Why You Can’t Keep Your Health Care Plan

November 15th, 2013 by Leave a Comment

By Trent Leonard

With the implementation of the federal health law commonly referred to as ObamaCare in full, disjointed, tragic swing, President Obama has confirmed what many long suspected: Even if you like it, you can’t keep your plan. 

Cancellation notices have gone out to hundreds of thousands of consumers, with more expected. Georgia’s insurance commissioner, Ralph Hudgens, estimates the number of Georgians affected could reach 400,000. Now the question turns to why. What changed between the President’s infamous stump speech and the imbroglio of Healthcare.gov?

The half-truth many believed in 2009 was their existing plans would be “grandfathered” – exempted from the new law. Existing plans were certainly going to have to comply with some of the new law’s mandates such as ending lifetime coverage limits and covering adult children up to age 26, but otherwise the plans were supposedly going to be able to continue under the Affordable Care Act. 

Of course each benefit requirement, regardless of its merit, tends to add to the plan’s costs and thus drives up premiums. But before more was known about the law, the new exchanges and the regulations that plans would have to comply with, most insurance plans took a pragmatic approach and pushed any final decisions on plan offerings into the future, when there would be more information.

The Department of Health and Human Services’ (HHS) regulations regarding grandfathered plans were released in June 2010. The provisions significantly constrained plans’ ability to adjust their benefits and costs going forward. For example, regardless of underlying health care changes, plans could not take even small measures such as increasing coinsurance percentages by any amount or increasing co-pays or deductibles for a benefit by more than an arbitrary, HHS-defined percentage. 

A co-pay increase as small as $5.25 could cause plans to lose their grandfathered status and be forced to conform to the law’s new insurance requirements in their entirety or cease operating.

In the minds of insurance companies, the negatives of continuing to offer these plans are beginning to pile up. The time and cost burden of complying with additional HHS regulations that micromanage business decisions would be significant and constraining. And the company would have to support products that cannot be offered to new customers, thus ensuring a shrinking risk pool and increasing fixed costs relative to members’ premiums. 

In fact, HHS’s own analysis of the proposed regulations estimated that, by 2013, between 39 percent and 69 percent of all employer-sponsored plans would “relinquish” their grandfathered status. Relinquish, in this case, is seemingly redefined to be the “choice” made when placed in an untenable situation. When a plan loses its grandfathered status, the plan must comply with the rest of ObamaCare’s myriad insurance mandates.

Cancellation notices started arriving in mailboxes across the country. 

Of course, the president has amended the promise he made dozens of times. Now, he’s stating that if you can’t keep your current plan, that’s OK; you’ll be able to get better insurance. “Better,” as defined by Washington’s rule-making bureaucrats. Your new plan will now contain 10 “essential” benefits, including substance abuse treatment and maternity care, driving premiums up regardless of whether you need or want such niceties. 

Tragically, this is the government’s version of health care reform: Constrain the market and the products it offers, removing the freedom for consumers to choose what is best for them and their families. Simultaneously, ply opinion with federally funded exchange subsidies to be financed like all entitlements: later. 

 

Trent Leonard is a graduate student at the University of Georgia. The Georgia Public Policy Foundation is an independent, state-focused think tank that proposes market-oriented approaches to public policy to improve the lives of Georgians. Nothing written here is to be construed as necessarily reflecting the views of the Georgia Public Policy Foundation or as an attempt to aid or hinder the passage of any bill before the U.S. Congress or the Georgia Legislature.

© Georgia Public Policy Foundation (November 15, 2013). Permission to reprint in whole or in part is hereby granted, provided the author and his affiliations are cited.

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