Obamacare forces cancellation of many health insurance policies

By Jennifer Popik, JD, Robert Powell Center for Medical Ethics

ACAplans4Hundreds of thousands of health insurance cancellation letters have been sent to customers, contrary to the promise of the Obama administration that “if you like your coverage, you can keep it,” according to an article by Anna Gorman and Julie Appleby in the October 21, 2014 Kaiser Health News. This round of plan reductions is only the beginning.

The main reason insurers give for these cancellations is that the policies do not meet some of the new criteria that the Obama Health Care law requires starting January 1, 2014. One woman whose insurance was cancelled and who had to search for a new insurance plan, Kris Malean, is quoted as saying, “My impression was …there would be a lot more choice . . . .”

This notion of having the opportunity to choose among an assortment of plans–or to stick with what you have–was a major selling point of the law. However, there is indication that choices are already dwindling, and this is expected to get worse and not better.

Gorman and Appleby report, “Like other insurers, the Blue Shield letters let customers know they have to make a decision by December 31 or they will automatically be enrolled in a recommended plan.”

But what will the coverage be like in these new “recommended” plans? There is reason to believe that the coverage will be less generous–especially over time.

A major component of the 2010 health law is the provision that it taxes insurance plans which are less likely to deny life-saving medical treatment and other health care. The primary purpose is to discourage businesses from providing what Obamacare advocates view as too much health coverage (derisively labeled “Cadillac” plans).

Starting in 2018, there will be a 40 percent tax on any employer-provided health coverage that goes beyond limits set by the law.

Although the tax does not begin until 2018, companies are already cutting back health insurance in anticipation. The consulting firm Towers Watson this fall surveyed 420 employers and found that more than 60% of large employers’ active health plans will be subject to the tax, unless the plans are changed. They expect plans to begin scaling back insurance coverage in 2014 and 2015.

What is worse, the threshold at which the tax kicks in will not rise enough to account for medical inflation. In a September 30 article in Politico entitled “How Obamacare affects businesses – large and small,” David Nather writes:

“[Thresholds will] be linked to the increase in the consumer price index, but medical inflation pretty much always rises faster than that. Think of the Cadillac tax as the slow-moving car in the right lane, chugging along at 45 miles per hour. It may be pretty far in the distance, but if you’re an employer and you’re moving along at a reasonable clip in the same lane — say, 60 miles per hour — and you don’t slow down, you’re going to run smack into it.”

These health insurance plans are ones that enable people to have freer access to life-saving medical treatments and procedures that a doctor and patient deem advisable to save that patient’s life or preserve or improve the patient’s health. These were plans that were used to attract employees, and ones that both employers and employees deemed worthwhile and valuable.

Thanks to this tax on health insurance, Americans can expect that plans that allow more access to healthcare will begin to disappear. Coverage choices are dwindling by the day, and implementation is only in the beginning phases.