Tempest in a Teapot

So the president has been telling us for the past three years that, under the Affordable Care Act (ACA), if you like your current health insurance and want to keep it, Obamacare will do nothing to change that.  Now hundreds of thousands of people are getting notices that their policies are not ACA-compliant and are being cancelled.  So the president is a big liar, just like Rush Limbaugh and Sean Hannity have been telling you for years now, right?

Wrong.  Measures in the ACA provide that policies being sold in 2010 would be grandfathered, i.e. companies could continue selling them, whether ACA-compliant or not, so long as no major changes are made to them, e.g. modifications to benefits, co-pays or limits of coverage.  If a company elects to change any of these things, the grandfather provision is dissolved and any new policy must be in accord with ACA requirements.

So it is the insurance companies, not Obamacare, that are causing the cancellations. But that’s not to say that, by doing so, insurance companies are doing anything shady, nefarious or out of sheer greed.  Rather, it’s pretty much standard practice for the individual marketplace.  A little background:

About 85-86% of Americans have some kind of health insurance.  Most, about 80%, have group policies of some sort, typically through employment, but that number also includes Medicare and Medicaid recipients.  That other 5-6% buys insurance directly on the individual market, and they are the ones potentially susceptible to policy cancellations.

Yes, it’s inconvenient and annoying to have your insurance company tell you your policy is being cancelled and you will have to replace it with something else.  However, this is extremely common in the individual marketplace, Obamacare notwithstanding.  That’s because such policies are typically twelve-month contracts at the end of which either party can opt out.  Under HIPAA (1996), companies are required to offer replacement policies, but nothing prohibits them from changing benefits or premiums when they do so.

And it’s not as if the cancellations are interrupting long term relationships between the insured and their companies.  Almost half of individual policies are held for less than six months, two out of three are kept for a year or less and only about one in six (17% 0f that 5-6% or less than 1% of all Americans with insurance) are held for as long as two years or more.

So, if your policy is cancelled, it’s NOT because of the ACA.  Your company was going to cancel it and you’d have to get a new policy, anyway.  The difference is that any new policy must be ACA-compliant.

So, how many people does that negatively impact?  As it turns out, not so many.  According to MIT economist, Jonathan Gruber:

  • The 80% of people with employer-based plans or similar coverage will just keep their current policies.
  • The 14-15% with no current coverage will now have access to it.
  • About half of the 5-6% with individual plans will acquire policies with similar coverage and cost.
  • And the other half of that 5-6% will have to consider buying more expensive, albeit more comprehensive, policies.

 

Click to enlarge.

So let’s see, the vast majority of people (83%) will be largely unaffected, 14-15% will suddenly gain access to healthcare and 2-3% will have to pay more for better coverage.  I’m afraid I do not see a train wreck in there, anywhere.  Much ado about nothing.

Oh, BTW, Michelle, it’s the Affordable Care Act or ACA, not AHA, which is the acronym, variously, for the American Heart Association, Arabian Horse Association or the American Homebrewers Association, take your pick.

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