The Affordable Care Act is Coming for Your Insurance

Millions of Americans will soon find out that even if they like their current health insurance, the Affordable Care Act ensures they won't be able to keep it.

Remember when President Obama claimed that “If you have insurance that you like, then you will be able to keep that insurance?” It was one of the central talking points in the campaign to sell the Affordable Care Act (ACA) to the American people. The problem, as we’re all starting to learn, is that the president’s claim does not apply to huge numbers of people who currently have insurance they purchased on the individual market.

Reports indicate that hundreds of thousands of people across the country with individual insurance have been receiving notices from their providers that their current health plans will no longer be offered because they do not meet the minimum coverage requirements or provide certain “essential benefits” mandated by the ACA.

According to HealthCare.gov, these essential benefits include “ambulatory patient services; emergency services; hospitalization; maternity and newborn care; mental health and substance use disorder services, including behavioral health treatment; prescription drugs; rehabilitative and habilitative services and devices; laboratory services; preventive and wellness services and chronic disease management; and pediatric services, including oral and vision care.”

Some news outlets have placed those numbers substantially higher. A recent CBS News story said that estimates of hundreds of thousands of people losing insurance are “just the tip of the iceberg.” CBS said that “more than two million Americans have been told they cannot renew their current insurance policies

more than triple the number of people said to be buying insurance under the new Affordable Care Act.”

They have the numbers to back it up, too. CBS reported that it “has confirmed with insurance companies across the country that more than two million people are getting notices they no longer can keep their existing plans. In California, there are 279,000; in Michigan, 140,000; Florida, 300,000; and in New Jersey, 800,000.”

According to CBS, “those numbers are certain to go even higher” because some insurance companies that confirmed to CBS that they've sent letters to policy holder won't say how many were sent.

As has become the norm with the ACA, the real story could actually be much worse. The Washington Post Wonkblog suggests that even those CBS numbers are too low. A recent entry there reported some experts have estimated that “somewhere between half and three-quarters of those who currently buy their own policies will not have the option to renew coverage, which works out to around 7 to 12 million people.”

Even many plans that are currently grandfathered under the ACA despite not meeting minimum coverage requirements will soon disappear as more companies opt to drop them. The Wonkblog noted that for insurance companies, grandfathered plans “are a bit of a dead end” because “they can't enroll new subscribers and are really constrained in their ability to tweak the benefit package or cost-sharing structure. There's not a whole lot of business sense, for a managed care company, in maintaining a health plan that doesn't meet the health law's new requirements.”

So, because of the higher standards for insurance coverage set by the ACA, a significant number of health plans will soon go the way of the dodo, forcing policy holders to buy other, presumably more expensive plans, from that same company or try their luck on the health exchanges.

Given the fiasco that has been the original rollout of the federal health exchange, this is hardly an attractive option at this point, as acknowledged by Health and Human Services Secretary Kathleen Sebelius during testimony before the House Committee on Energy and Commerce, when she wrote (in what is surely the front-runner for Understatement of the Year) that “Some have had trouble creating accounts and logging in to the site, while others have received confusing error messages, or had to wait for slow page loads or forms that failed to respond in a timely fashion. The initial consumer experience of HealthCare.gov has not lived up to the expectations of the American people and is not acceptable.”

The bottom line is that millions of consumers on the individual market will be forced to sign up for new health plans, even if they don't want or need the more generous coverage demanded by the ACA, or pay a fine. Last week, NBC News reported that the administration knew this was a very likely outcome all along, stating that “buried in Obamacare regulations from July 2010 is an estimate that because of normal turnover in the individual insurance market, ‘40 to 67 percent’ of customers will not be able to keep their policy.”

However the deductibles, co-pays, and/or benefits of those policies will change over time, causing them to lose grandfathered status. Not only were administration officials aware of this, they predicted that the percentage of individual market policies losing grandfather status in a given year would exceed that 40% to 67% range. Per NBC News, “That means the administration knew that more than 40 to 67 percent of those in the individual market would not be able to keep their plans, even if they liked them.”

As Rick Newman from The Exchange finance blog put it, this all “makes Obama look like he was either fibbing or didn’t know the ramifications of his own law.” I don’t know which option would be worse, but for the millions of Americans facing the harsh truths of the President’s signature policy achievement, it doesn’t much matter.