Dueling opinions on individual insurance cancellations

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Category : Medical Rants

The GW Center on Health Insurance Reforms offers this explanation on the individual insurance cancellations – Policy Cancellations – Another Tempest in a Teapot?

Having an insurance company discontinue an insurance policy is not anything new. And actually, the term “policy cancellation” is a misnomer. Generally, an individual health insurance policy is sold via a 12-month contract between the insurer and the consumer. At the end of that contract period, the insurer has the option to discontinue or change that policy – nothing in federal law changes that. Current policyholders are not having their current policy cancelled – rather, the insurance company is exercising its option to discontinue the policy at the end of the contract year.

Ross Douthat writes in the NY Times – Obamacare’s Losers and Why They Matter

On the policy substance, meanwhile, despite his kind nod to our “reasonable” disagreement, I actually strongly agree with Cohn that it’s fair to ask some people to pay more for the health insurance they currently have in order to make health insurance more accessible to the currently-uninsured. As I’ve noted before, during the exciting debate about “bros” and health care reform early this year, every plausible conservative alternative to Obamacare does that in some form or another — and part of the reason that Republican politicians have been hesitant to embrace those alternatives, unfortunately, is an anxiety about precisely this reality and its potential political costs.

But not every form of “asking some people to pay more” is created equal. A cap on the tax break for employer-provided health insurance, for instance — which is central to most right-of-center health care proposals, and is taking effect in a more limited way in the form of Obamacare’s so-called “Cadillac tax” on expensive insurance plans — basically asks people who have been getting a very good deal from current health care policy (the well-off and upper middle class, and some union members with generous benefit packages) to live with a somewhat smaller subsidy and somewhat less generous employer coverage going forward. (For a more specific illustration of how this works, you can read Josh Barro explaining it using the example of Senator Ted Cruz and his wife.) This policy change isn’t cost free, and it would still violate President Obama’s unwise “if you like your plan, you can keep it” pledge. But it promises to level the health-insurance playing field somewhat while asking the most from those Americans who have benefited from its existing tilt.

But “rate shock” seems different, because premium increases in the individual market creates a set of Obamacare losers within a group of people who weren’t obviously winners to begin with. A couple like the Harrises of Fullerton, California, for instance, making $80,000 a year and buying on the individual market in a high cost-of-living state, were already disadvantaged relative to the millions Americans who get insurance through an employer and benefit from the employer tax break; now they’ll be paying an extra $1500 a year as well (albeit, yes, perhaps for more comprehensive coverage). Likewise some of the hypothetical Connecticut residents discussed in my column: If you’re 50 years old in my native state, make $50,000 a year, and buy on the individual market, you’re thrice a loser under the new system. You don’t benefit from the employer tax deduction, you don’t qualify for the new subsidies, and your insurance prices could be jumping by $200 a month.

So is this much ado about nothing? Is this a Fox News crisis? Or is this a fundamental problem for public acceptance of the law? The web site will get fixed. But what happens a year from now when business health plans must comply?

I want this to work, but the individual cancellation story (started by investigative reporting at the LA Times) does bother me. Is it fair to blame this problem on the insurance companies solely?

Comments (9)

My wife’s retirement plan had to drop two lower cost policies in favor an upper end plan to meet the new guidelines. Fortunately we were already on that plan and it seems to meet the new government mandated guidelines. This will not stop the $1,200 addition to our premiums in the coming year.

Remember also that Obamacare puts a cap on insurance income making them nothing more than federally regulated utilities. Additional cost will be seen as the medical device tax takes effect. A point off the top is worth ten on the bottom or one percent of gross sales in a company that makes ten percent profit are equal to ten percent of profit. The result of the new tax is device companies will be giving up almost a quarter of their profits to a tax with no deductions since it is on gross sales.

Many people are not happy with the pre-existing condition exclusions and would understand an increase to cover those who need this coverage.

Keeping adult children on their parent’s policies is a response to the economic reality that we need three percent growth in GDP to both support continued employment levels and absorb new people entering the job market. This level of growth simply has not occurred for several years and unemployment is a poor measure of our current situation. Underemployment is a better measure of our weak economic growth.

So being retired do we cut 20% from our food bill? Reduce our charitable giving? Explain to family and friends at the holidays we have higher insurance bills and that there will be no gifts or big dinners at our house.

We are lucky and are able to absorb this increase, but very few people are as lucky. Many stated when the original debate was taking place you could not insure more people, with more coverage, and do it for less money. Those statements were ignored and next year companies will eliminate corporate coverage, cut back hours, or take other steps to reduce their insurance liability.

This is not Fox; this is the reality of a bill that was pushed through on party lines based on the 1960’s idea that you do the right thing man, without think through the process and being honest to those involved.

Steve Lucas

Not true that policies are just being allowed to expire.

BCBSNC notified all individual policy holders, and any groups of under 50 people, that their policies were to be cancelled effective 1 January.
These included employer sponsored groups who did meet the ACA requirements (either under coverage, or cadillac coverage).
Several employers bought a little time by questioning the business practice of early cancellation (and the loss of accumulated deductibles, for example), and were extended to their original time in 2014.
However, that did not erase the need for their employees and covered family members to go on to the federal exchange, or to private exchanges, to buy now-overlapping insurance in order to meet the requirement of having insurance after the open enrollment period.
In NC there is utter chaos at this time in the medical insurance market. BCBSNC has a monopoly on providing insurance through the exchange. Practices are looking at the 30% SGR cut that doesn’t look high on Congress’ list of activities to correct. Specialists aren’t particularly enamored with the proposed alternative of cuts. State employees, retired on Medicare with supplemental insurance are being driven to choose more expensive BCBS supplements versus enrolling in two Medicare Advantage plans that do not have network in 60% of our counties.
Never has there been such chaos in health care financing in my 35 year career.

In the Oct. 30 WSJ opinion piece The Outrage Arrives by Holman W. Jenkins Jr. we find this:

“Democrats at least are consistent. Back in 1993, during the fight over HillaryCare Mrs. Clinton explained Democratic reasoning to the House GOP Leader Denny Haster. If Americans are allowed too much discretion over how they spend their health-care dollars, Mrs. Clinton said, “We just think people will be focused on saving money and they won’t get the care for their children and themselves that they need …

“The money has to go to the federal government because the federal government will spend that money better.”

….Mr. Obama says he cares about your incentive to get preventative care or test that you may not get if they don’t appear to involve a free lunch.”

We as a country already have more than enough money in our medical system to pay for coverage for everyone given our cost per person and lack of better outcomes. The current ACA mandates do nothing to control cost, and in fact will encourage continued over use of our medical resources.

Even with the ACA there was going to be a certain number of people without insurance. Will we now see a larger number of people, not only without insurance, but with tax liabilities due to penalties enforced by the IRS because they are unable to navigate an impossible system, or receive coverage that is actually usable in their communities?

Steve Lucas

My blog post on why replacing substandard policies with ones that have better benefits and consumer protections can be a good thing, although I sympathize with those who have to pay more to replace their individual plan with one that meets the federal requirements. http://advocacyblog.acponline.org/2013/10/cancelled-policies-or-better-polices.html

so these academics are actually saying that you have a policy, at the end of its term the company decides not to renew it – and that’s not canceling your policy.
That sophistry is clearly the product of overeducated minds.

Yes, of course insurance companies alter the terms of contracts at renewal time. That is why people change insurance policies, as well as employers and public entities. What we are seeing here is entirely different. Policies are being cancelled because they are not “in compliance” with the mandates of the ACA. Maybe they don’t cover childbirth. Maybe they don’t cover birth control. Maybe they don’t cover something else. BUT maybe that was OK with the customer, who didn’t want birth control because they didn’t believe it was moral. That was their decision, and it didn’t hurt anyone else. But now, they don’t have that option, and they have to purchase something they don’t want, with the coercion of paying a fine if they don’t. How is that excusable in a free society?

To claim that the cancelled policies are “bad” is to adopt a paternalism that smacks of an incredible hubris. There has been no shortage of such from the current administration, but that does not make it forgivable.

Obamacare will be a disaster. Such complex systems are inherently rife with unintended consequences, which cannot be legislated away. The loss of jobs, the decrease in hours of part time workers, the ridiculous number of waivers granted to companies and unions, the exposure of the lie of “you can keep your healthcare plan” and now the healthcare.gov website disaster is only the events that have already happened. More are coming.

Mr. Doherty, Obama is the one selling scam insurance policies.
… So anyone peddling the notion that insurers are cancelling people’s plan without mentioning that almost all the insurers are encouraging people to join better plans with the same carrier, and stronger benefits and stronger protections, while others will be able to get better plans with new carriers through the marketplace, and that many will get new help to pay for these better plans and make them actually cheaper — if you leave that stuff out, you’re being grossly misleading, to say the least.

But is that true? Are the new plans on the exchange really that much better than the plans currently sold by insurance companies?

Not if you want to receive care at the nation’s top hospitals they aren’t. U.S. News reports:

Americans who sign up for Obamacare will be getting a big surprise if they expect to access premium health care that may have been previously covered under their personal policies. Most of the top hospitals will accept insurance from just one or two companies operating under Obamacare.

Regulations driven by the Obama White House have indeed made insurance more affordable – if, like Health and Human Services Secretary Kathleen Sebelius, you’re looking only at price. But responding to Obamacare caps on premiums, many insurers will, in turn, simply offer top-tier doctors and hospitals far less cash for services rendered.

Watchdog.org looked at the top 18 hospitals nationwide as ranked by U.S. News and World Report for 2013-2014. We contacted each hospital to determine their contracts and talked to several insurance companies, as well.

The result of our investigation: Many top hospitals are simply opting out of Obamacare.

Chances are the individual plan you purchased outside Obamacare would allow you to go to these facilities. For example, fourth-ranked Cleveland Clinic accepts dozens of insurance plans if you buy one on your own. But go through Obamacare and you have just one choice: Medical Mutual of Ohio.

At this link we have a reference to the recent 93 million number of people loosing their existing insurance. While that is almost one third of the population the real number is how many of those 93 million provide insurance for their entire household?

That number will have a multiplier effect reaching almost every home in the nation.

http://www.forbes.com/sites/theapothecary/2013/10/31/obama-officials-in-2010-93-million-americans-will-be-unable-to-keep-their-health-plans-under-obamacare/

Steve Lucas

there is a really simple answer that we need to make sense of this debate

In 2008, and 2007, and…
how many policys were canceled ?
I have not yet found out, but it was a BIG PROLEM, a problem that PPACA is fixing
http://blogs.wsj.com/health/2008/07/18/insurance-cancellation-questions-could-spread-beyond-california/

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