Ever since NBC reported on Monday that HHS knew that their ObamaCare regulations would force the cancellations of “40 to 67 percent” of all insurance plans in the individual market, the White House and its allies have insisted that only a small percentage of Americans overall would lose their current health insurance plans. David Axelrod specifically cited the difference between the individual market and employer-based health insurance to argue that “most Americans” will keep their plans, a claim that Politifact laughably rated as “mostly true.” Jay Carney himself drew an explicit contrast to defend the “keep your plan” lie:
So let’s step back. If you are one of the 80 percent of the American people who receive insurance coverage through your employer or through Medicaid or Medicare or the Veterans Administration, this conversation doesn’t apply to you. These reports do not apply to you. If you’re one of the 15 percent of the American people who are uninsured entirely right now, this conversation does not apply to you. So what we’re talking about here is the 5 percent in the country who currently purchase insurance on the individual market.
And that market has been like the Wild West. It has been under regulated. It is the place where Americans have most keenly felt the challenges posed by the insurance system in this country, where, for example, insurers could deny you coverage if you have a preexisting condition, or they could offer you coverage that in its fine print excluded benefits specifically related to your preexisting condition. So if you have hypertension or you’re a cancer survivor, they could carve out coverage on those specific issues and then give you a plan that would cover you on other things.
They could also, and did, routinely, change your plan or eliminate it altogether, annually. They could throw you off. They could jack up your premiums. They could change your coverage. And one of the issues that the Affordable Care Act was designed to address was the need to provide greater security to those Americans who had no other option but to seek insurance on the individual market.
So that’s the universe we’re talking about: 5 percent of the population. And I think it’s important to know that, because in some of the coverage of this issue in the last several days, you would think that you were talking about 75 percent or 80 percent or 60 percent of the American population. So there’s that.
Except that this conversation actually does apply to all Americans, and not just those on the individual markets, argues Avik Roy at Forbes. The HHS analysis of the markets and the impact of ObamaCare on plan offerings was not limited to just the individual markets. When the employer mandate gets enforced for the 2015 enrollment, as many as 93 million Americans may find that their job-provided coverage will go the way of the individual plans this year:
But Carney’s dismissal of the media’s concerns was wrong, on several fronts. Contrary to the reporting of NBC, the administration’s commentary in the Federal Register did not only refer to the individual market, but also the market for employer-sponsored health insurance.
Section 1251 of the Affordable Care Act contains what’s called a “grandfather” provision that, in theory, allows people to keep their existing plans if they like them. But subsequent regulations from the Obama administration interpreted that provision so narrowly as to prevent most plans from gaining this protection.
“The Departments’ mid-range estimate is that 66 percent of small employer plans and 45 percent of large employer plans will relinquish their grandfather status by the end of 2013,” wrote the administration on page 34552. All in all, more than half of employer-sponsored plans will lose their “grandfather status” and get canceled. According to the Congressional Budget Office, 156 million Americans—more than half the population—was covered by employer-sponsored insurance in 2013.
Another 25 million people, according to the CBO, have “nongroup and other” forms of insurance; that is to say, they participate in the market for individually-purchased insurance. In this market, the administration projected that “40 to 67 percent” of individually-purchased plans would lose their Obamacare-sanctioned “grandfather status” and get canceled, solely due to the fact that there is a high turnover of participants and insurance arrangements in this market. (Plans purchased after March 23, 2010 do not benefit from the “grandfather” clause.) The real turnover rate would be higher, because plans can lose their grandfather status for a number of other reasons.
How many people are exposed to these problems? 60 percent of Americans have private-sector health insurance—precisely the number that Jay Carney dismissed. As to the number of people facing cancellations, 51 percent of the employer-based market plus 53.5 percent of the non-group market (the middle of the administration’s range) amounts to 93 million Americans.
That’s not the worst of the issue for Obama and Democrats, either. The last question asked by Roy is whether employers will bother to make those changes at all. Employers will face a critical decision point by September 2014 of whether to pay the fine for non-coverage and force their employees into the individual exchanges, or absorb more of the skyrocketing premium costs we’re seeing this month. They may opt for an in-between solution of private exchanges, but even that will force employees out of their current plans, contra to the Obama promise that Americans can “keep their plans.”
Those decisions and actions will take place just weeks before the midterm elections. Take the headlines and outrage we are seeing now for the impact that ObamaCare has on the individual market and perhaps as many as 12 million Americans, and then multiply it by six as employers make the rational decision to get out of the health-insurance business altogether. The delay of the employer mandate may end up being the worst decision made by Barack Obama except for the hyperpartisan pursuit of ObamaCare itself.