Six months into his presidency, Barack Obama promised that his proposed health reforms wouldn’t force people who were happy with their insurance to change. “If you like your health-care plan, you’ll be able to keep your health-care plan, period,” he said. But hundreds of thousands of people are finding out that’s not the case. Insurance companies are terminating policies for many people whose insurance doesn’t meet the standards of the new health law. Here’s what you need to know:
Why is this happening?
The Affordable Care Act sets standards that private insurance companies must follow. Health plans must pay for at least 60 percent of their members’ medical costs on average. They also have to provide 10 areas of coverage, called essential health benefits, such as hospitalization, mental health treatment, and maternity care. Plans that don’t meet these standards generally can’t be sold after 2013, unless they’re grandfathered (more on that below). Insurers are ending these plans and pushing people to buy more comprehensive policies, some of which may also have higher premiums. For low- and middle-income people, the law provides subsidies to make health coverage more affordable.
Which plans are getting canceled?
The change mostly affects people who buy their health plans on their own, rather than those getting coverage through an employer. Most employer health plans already meet those standards. There were about 11 million people in the individual market in 2011, according to data from the Kaiser Family Foundation. Not all of their plans are being terminated, because some of them meet the law’s requirements. A study published last year in Health Affairs found that half of the people in this market had plans that pay for less than 60 percent of their medical costs, falling short of the law’s requirement. Even more plans may not have offered all 10 essential health benefits, but the study didn’t look at that.
What about “grandfathered” plans?
Health plans that existed before Obamacare was passed in 2010 could avoid some of the new standards if they didn’t change much else. It’s up to insurers and employers to decide whether they want to keep offering so-called grandfathered plans. But plans that significantly increased what people have to pay or changed the benefits offered in the last three years would lose their grandfathered status, and they have to follow the new rules starting in 2014. The grandfather option also gives some political cover to the White House, because it puts the decision to terminate a plan on insurance companies, not the government.
How big a deal is this?
Politically, it’s awful for Obama. The promise to let people keep their doctors and health plans was one of his biggest talking points when he sold the health law to Americans. The line underplayed how Obamacare’s many moving parts would affect the health insurance market, with some unforeseen consequences for consumers. People are getting letters from their insurance companies saying their old plan is ending just as the healthcare.gov marketplace, where they theoretically could shop for new plans, is limping along. The situation angers and confuses ordinary consumers and gives fodder to the president’s critics.
Beyond the politics, though, insurers are being forced to replace skimpy coverage with more robust health plans. These will cost some people more, but the law also helps those with modest incomes pay for them. Obamacare’s market reforms keep insurers from turning people with preexisting conditions away, so those people whose plans are terminated are guaranteed to be able to buy new coverage. It’s one more difficult step in the messy process of changing the health-care system.