- Of the 189 million Americans with private health insurance coverage, at least 68% will not be able to keep their previous health care
- Virtually all plans that existed prior to the law will be subject to changes that will increase premiums for the vast majority
- Without a shred of the micromanagement now being imposed, the typical employer plan was voluntarily well above the floor set by Obamacare
Former senior advisor to President Obama, David Axelrod said earlier this week that “the vast majority of people in this country are keeping their plan.” I suppose one could interpret this as a tacit admission that at least for those not in the vast majority, Obamacare violates President Obama’s June 15, 2009 promise that If you like your health care plan, you’ll be able to keep your health care plan, period. No one will take it away, no matter what.” But the sad reality is that David Axelrod himself also is dead wrong: it’s more accurate to say that the president’s pledge will be shattered for a solid majority of Americans with private health insurance coverage.
More precisely, of the 189 million Americans with private health insurance coverage, I estimate that if Obamacare is fully implemented, at least 129 million (68%) will not be able to keep their previous health care plan either because they already have or will lose that coverage by the end of 2014. This includes:
- 9.2 to 15.4 million in the non-group market (my chart uses the lower of these figures)
- 16.6 million in the small group market
- 102.7 million in the large group market
Most of these are individuals involuntarily forced to purchase expensive add-ons to their existing plans. But included among these are the many millions now having their non-group policies cancelled along with 9 to 35 million who will lose their existing employer-provided plans entirely. Most admittedly will find other coverage, yet out of this group, 1.5 million will become uninsured, along with 2.3 million from the non-group market who likewise become uninsured because they simply cannot afford the expensive Obamacare upgrades. In short, the “vast majority” are not keeping their health plans. Statements to the contrary are flatly untrue.
Here’s how I reach those conclusions.
What Does it Mean to Keep Your Health Plan?
As reported by Bloomberg News:
“I keep playing that over and over in my head: that you can keep your health plan, period,” said Terri Flay, a Manassas, Virginia, woman whose policy is being canceled, referring to Obama’s pledge. “But it isn’t ‘period.’ They put a gun to my head saying that I have to pay more because I need the health-care insurance.”
I’m hoping all readers can agree that for people in Terri’s situation, even though a private insurance company executed the action, the president’s promise was flagrantly broken. It doesn’t mean that Terri will end up uninsured–we can all hope she won’t–but even though she (to all appearances) liked her old plan, Obamacare essentially has taken this away from her. Obamacare’s rules forced the insurer to literally cancel her plan pure, no ifs ands or buts. Even White House spokesman Jay Carney appears to finally have conceded this simple point this week.
Let me be clear that I am not predicting that 135.8 million Americans have or will have their policies cancelled due to Obamacare. But remember the president’s elaboration on his original promise made in a June 23 press conference in response to a question from Jake Tapper:
When I say if you have your plan and you like it, or you have a doctor and you like your doctor, that you don’t have to change plans, what I’m saying is the government is not going to make you change plans under health reform.”
Lest you think I am simply playing “gotcha” with an offhand remark, this was not an idle claim. The president repeated it with even more specificity in his speech to a joint session of Congress later that September (which was merely one of 24 instances in which he made this promise):
If you are among the hundreds of millions of Americans who already have health insurance through your job, Medicare, Medicaid, or the VA, nothing in this plan will require you or your employer to change the coverage or the doctor you have. Let me repeat this: nothing in our plan requires you to change what you have.
No one can honestly look at the long list of mandates included under Obamacare and conclude that these do not require any changes in coverage–sometimes substantial–even for those with existing health plans. And yet Jay Carney said just this week: “Eighty-plus percent of the American people already get insurance through their employer, through Medicare or through Medicaid. They don’t have to worry about or change anything.” This is a flagrant falsehood.
To add insult to injury, Mr. Carney added “it is correct that substandard plansthat don’t provide minimum services that have a lot of fine print that leaves consumers in the lurch often because of annual caps, or lifetime caps, or carve outs for some preexisting conditions, those are no longer allowed because the Affordable Care Act is built on the premise that health care is not a privilege, it is a right and there should be a minimum standard of plans available to Americans around the country.”
Here in a nutshell is the problem. The minimum actuarial value established by Obamacare was 60%: that is, plans must cover 60% of covered expenses for a typical plan member, leaving the rest to be paid out of pocket. Yet in 2009, the average actuarial value for a typical employer-based HMO was 93%, while that for a typical employer-based PPO was 80-84%. In contrast, Medicare’s average actuarial value was 76%. The point being that without a shred of the micromanagement now being imposed under Obamacare, the typical employer plan voluntarily was well above the floor set by Obamacare and well above the benefits deemed adequate by the government itself for that single-payer plan known as Medicare. Consequently, it is unlikely that most employers (or their employees) ever viewed their coverage as “substandard.” And candidate Obama certainly did not get elected on a platform of promising to upgrade the lousy health coverage provided by employers.
To take a more concrete example, Medicare prior to Obamacare covered a long list of preventive services, but these were subject to varying levels of cost sharing. A large number of employers did the very same. Who knew Uncle Sam–under the guise of solving the problems of high health costs and 50 million uninsured–would determine this was “substandard” coverage completely unworthy of protection by the president’s pledge? Does anyone recall candidate Obama running on a platform of free preventive health services (including contraception, sterilization and abortifacients) for all? You can rest assured he never would have been elected had he ever been so honest about what he planned to deliver to the American people under the banner of health reform.
In the context of employer-based plans that already were voluntarily providing an AV of 83%, I find it particularly pernicious that the ACA designers nevertheless felt compelled to impose further requirements—free preventive services, for example—essentially saying, “Look, we know your BMW is a very safe and reliable car but we think you need to add this auto-locking system that prevents you from driving your car if you haven’t changed the oil in 3,000 miles. It only adds 1.5% to the cost of your car (you can afford it!) and it will prevent you from getting stuck out in the middle of nowhere and possibly dying because your engine blew up.” In a free country, we shouldn’t have to be worrying about this type of micro-managing of our private lives and decisions. This manifestly is not the role for the federal government envisioned by our liberty-loving Framers (the men who risked their lives, their fortunes and sacred honor to defend their freedom). I feel certain that Patrick Henry did not risk death for the privilege of creating a federal government so powerful that it could force us all to chip in and pay for Sandra Fluke’s contraceptives.
A president who ran on a platform of pledging to fix what was broken and leave alone everyone else who was happy with their coverage surely had no political mandate for the kind of intrusive and expensive changes to health benefits that are now angering tens of millions of Americans. The health law passed with the tiniest of political margins. President Obama’s pledges and assurances were an integral part of securing enough political will to cross the goal line. For that reason, it is important to hold him and his spokesmen to account for the accuracy of their pledges and predictions. Those willing to wallow in the weeds of wonkery that follow can judge for themselves whether I am being too harsh in my criticism of Mr. Axelrod or his former boss.
How Many People Have Private Health Insurance?
Medicaid. The president’s original promise only makes sense in the context of private health insurance. Nobody was worried that this progressive president would take away Medicaid benefits from the 43 million who had such coverage in 2010 or the nearly identical number who had Medicare benefits . Indeed, under the plan finally signed into law by President Obama, fully half the newly covered were expected to obtain that coverage through a massive expansion of Medicaid.
Medicare. Those on Medicare weren’t so lucky; the law also imposed cutbacks on Medicare Advantage plans so severe that the “the Congressional Budget Office (CBO), the Centers for Medicare and Medicaid Services (CMS) Office of the Actuary (OACT), and America’s Health Insurance Plans (AHIP) projected that Medicare Advantage enrollment would sharply decline, resulting in fewer Medicare Advantage enrollees nationwide than CBO previously projected in 2009, and as many as 7 million fewer Medicare Advantage enrollees in 2019.” Those 7 million were expected to be disproportionately low-income seniors . Fortunately, for a variety of reasons not fully understood, Medicare Advantage enrollments have not declined, but then again we have not seen the full impact of the Obamacare payment cuts to such plans either. So for purposes of determining the accuracy of David Axelrod’s claim, it’s best to leave those with public plans off table.
Private Insurance. There are 189 million Americans with private health coverage, including 18.1 million non-elderly with individual (non-group) coverage plus 170.9 million with employer-sponsored insurance (ESI). This is the appropriate denominator to use when assessing the accuracy of either the president’s original promise or Obamacare defenders such as David Axelrod. For simplicity, it’s best to think about 3 broad market segments: non-group, small group (firms with under 50 employees) and large group (firms with 50 or more employees, including health plans for federal, state and local government workers).
Individual Market (18.1 million)
In the individual market, anywhere from 9.2 to 15.4 million will lose coverage out of the 18.1 million non-elderly covered.
- A 2012 Health Affairs study showed that 51% of plans in the non-group market did not meet the 60% floor on actuarial value imposed under Obamacare. This implies that eventually, a minimum of 9.2 (=51% x 19.4) million non-group policymakers will be forced to upgrade their coverage to remain compliant.
- According to a study at HealthPocket.com, “less than 2 percent of the existing health plans in the individual market today provide all the Essential Health Benefits required under the Affordable Care Act.” This is the basis for my concluding that virtually all small group plans eventually will be forced to upgrade in some fashion once they have lost grandfather status.
- Thus, anywhere from 51 to 98% of non-group plans will have to be modified to meet the more expensive Obamacare standards, unless they are grandfathered. But insurance expert Bob Lazewski has reported that when all the high hurdles to retain grandfather status are taken into account, 85% of the 18.1 million are in plans that do not qualify for grandfathering and therefore must become ACA-compliant by Jan. 1, 2014. This implies that for 2014, we should expect 15.4 million to have to change plans.
Small Group Market (31.3 million)
The 170.9 million with ESI includes workers and dependents. According to this year’s authoritative Kaiser Family Foundation/HRET Employer Health Benefits Survey, only 18.3% of covered workers work in firms not subject to the employer mandate (under 50 workers). Virtually all of the 31.3 million covered by these small firm plans will be forced to change their benefits since the essential health benefits (EHB) standards include some very atypical benefits (pediatric dental/vision, habilitative care). For example, one government study showed that for some essential health benefits, such as preventive dental services for children, only 5% of small group plans met the EHB standards. According to the American Action Forum, “premium increases associated with coverage of the essential health benefits have ranged from 0.13 percent in Rhode Island to 33 percent in Maine, with most states expecting single-digit increases.”
As well, only a few employers offered preventive health services without any cost sharing (a mandate separate and apart from EHBs), especially when the list of such services has been unaccountably broadened to includecontraception, sterilization and abortifacients. An Aon Hewitt survey of major health insurance carriers estimates this will add up to 2% to premiums in the small group market (Fig. 11).
As in the non-group market, the only exception is if these plans remain grandfathered. But as of 2013, only 52% of covered workers were in grandfathered plans meaning that 48% already had to upgrade their coverage to meet ACA standards. In 2011, 63% were in grandfathered plans. Eventually all grandfathered plans will lose that status, though it may be years before that fully plays out. So in addition to the 15 million who already have lost the coverage they once had, it’s reasonable to expect based on the KFF/HRET survey trends that each year another 1.6 million will fall into this group, leading to a net total by the end of 2014 of 16.6 million.
Large Group Market (139.6 million)
Obamacare Standards Applicable to All Large Group Plans. In the employer-sponsored insurance (ESI) market, there are mandates that apply to all ESI regardless of grandfather status:
- Mandatory coverage of adult children up to age 26. 77% of large firms (200 or more employees) in 2010 stopped dependent coverage at age 23 [Exhibit 3.11] although for such dependents who were full-time students this percentage dropped to only 25% [Exhibit 3.12]. An Aon Hewitt survey of major health insurers reports the average premium impact from this provision would be 0%; in the large group market the average premium increase ranged from -0.5% to +1%; in the small group market it went from -0.5% to +2%; the projected change was about -0.8% to +3.5% in the non-group market (Fig. 11).
- No waiting periods over 90 days. 7% of covered workers in large firms (200 or more employees) in 2010 were in plans with waiting periods exceeding this threshold [Exhibit 3.8].
- No policy cancellations except for fraud.
- No caps on lifetime benefits. An Aon Hewitt survey of major health insurers reports the average premium increase associated with removing annual and lifetime caps on benefits would range from 0% to just under 1% in the large group market, about 0-0.8% in the small group market and about 0-2.2% in the non-group market (Fig. 11). However, some carriers reported premium increases as high as 5%. It was not reported how much of this could be attributed to removing the caps on lifetime benefits alone.
- Medical loss ratio restrictions. Self-insured plans are excluded from this requirement. 83% of covered workers in large firms (200 or more) were in self-funded plans in 2010 [Exhibit 10.3]
It’s not obvious how these various restrictions intersect. Presumably, many of the firms that fail the first standard might fail to meet the second standard as well. Thus, all we can say with certainty is that 77% of plans had to change their eligibility criteria to accommodate dependent adults. Strictly speaking, this does not change any employee’s coverage per se, although it would have a slight impact on premiums. Similarly, the medical loss ratio provisions would affect 17% of large firm workers, but this again would only potentially increase premiums rather than affect their terms of coverage. But of course by this standard, none of the listed mandates are applicable since they all relate either to eligiblity or other matters. The lone exception is the prohibition on lifetime benefits.
Obamacare Standards Applicable to All Non-grandfathered ESI Plans. There’s a different set of mandates on all ESI except grandfathered plans:
- No caps on annual benefits. (12% of covered workers were in plans with annual caps on benefits in 2010 [Exhibit 13.11]. See the previous discussion of removing caps on lifetime benefits for potential premium impacts related to this provision.
- Preventive services without any cost-sharing. Although specifics were not written into the law, we now know that the regulations were written so broadly to include contraception, sterilization and abortifacients. On average DHHS estimates this will increase premiums by 1.5%, which the agency expects plans to pass along to its members. The Aon Hewitt survey cited earlier reports the average premium increase would range from 0-1% in the large group market, 0-2% in the small group market and 0-3.5% in the non-group market (Fig. 11); some carriers reported expected premium increases as high as 15% just for this provision alone.
- Out-of-pocket maximums.
- Minimum actuarial value of 60%.
- Patient protections (plans prohibited from requiring referral to see OB-GYN or requiring pre-authorization or higher cost-sharing for out-of-network emergency services).
However, only 30% of large firm workers are in grandfathered plans in 2013 (compared to 53% in 2011 ), so this reinforces my point that eventually all plans will lose grandfather status. But it means that 70% of large group plans already have had to upgrade their benefits in some fashion, with attendant premium increases.
When all is said and done, over 100 million in the large group market will, due to Obamacare, no longer have the health plans they used to have.
How Many Will Literally Lose Their Entire Previous Plan?
Most of the individuals counted in the foregoing estimates will be forced to purchase expensive add-ons to their existing plans. But included among these are the many millions now having their non-group policies cancelled along with 9 to 35 million who will lose their existing plans entirely due to employers electing to drop their employer-based coverage or make it unaffordable.
The RAND Corporation estimates that 28% of these will end up on Medicaid [see Exhibits 2.4 and 2.7]. Medicaid, as has been explained repeatedly by my fellow blogger Avik Roy, is a far inferior substitute for private coverage. Those who don’t believe this can do the following mental experiment: would Congress ever pass a law giving themselves (free!) Medicaid coverage in lieu of their Federal Employee Health Benefits Plan coverage?
Another 46% will end up on the Exchanges [see the same RAND exhibits]. You might say “no big deal” since they got alternative coverage. But the National Journal’s independent assessment concluded that even after taking into account subsidies available on the exchanges, 66 percent of workers with single coverage and 57 percent of workers with family coverage will face higher premiums on the exchange compared to what they would pay for employer-sponsored coverage.
Moreover, the RAND study showed that 26% (1.5 million) who lose their employer-based coverage will become uninsured [Exhibit 2.7], along with other 2.3 million from the non-group market [see same exhibit] who likewise become uninsured because they simply cannot afford the expensive Obamacare upgrades. For such individuals, the president’s promise was badly broken indeed.
The Bottom Line: It’s Not Complicated
As AT+T spokesman says “It’s not complicated.” Virtually all health plans that existed prior to the law will be subject to some changes in eligibility or benefits that will increase premiums for the vast majority of subscribers. The only people who will be allowed to keep their pre-March 23, 2010 plans mostly intact are those in grandfathered plans.
But the restrictions on such plans are so tight that only 49% of those covered in the small group market and 30% in the large group market currently remain in grandfathered plans. And this is no unexpected outcome. When Obamacare regulators wrote the rules for grandfathered plans back in June 2010, they explicitly projected that by 2013, only 20-51% of small group plans would retain grandfather status, along with 36-66% of large group plans [Table 3]. So experts have known for years that the president’s promise was destined to be eviscerated by this time.
I hope readers now can see why I believe Mr. Axelrod’s statement is egregiously inaccurate. I recognize he is not a health policy expert, so perhaps we can chalk it up to ignorance. It is not my place to decide whether he is lying (which is despicable) or merely uninformed (in which case spouting off untruths on national TV is lamentable and irresponsible). But until the administration and Obamacare’s defenders are willing to come clean about the pyramid of unintended consequences now piling up before our very eyes, it is hard to see how we can have a candid and productive discussion about how to replace this terribly misguided piece of legislation.
 When the president made his promise, the most recently conducted Current Population Survey estimates of coverage (from March 2009) showed 42.8 million with Medicaid coverage and 43.0 million with Medicare (Table C-3).
 As a Health Affairs Health Policy Brief put it: “Medicare Advantage supporters also emphasize the importance of the plans to low-income beneficiaries. These enrollees often can’t afford private “Medigap” plans that supplement Medicare by covering additional benefits and offering cost-sharing protection. They note that disruptions to the Medicare Advantage program disproportionately affect minority beneficiaries, since Hispanic and African American beneficiaries make up a larger share of Medicare Advantage enrollees.
 I am using Census figures from the Current Population Survey, but recognize there are other estimates of the size of the non-group market. The American Community Survey shows 23.975 million non-elderly with non-group coverage in 2011, whereas the CPS shows only 18.968. However, once the overlap with employer-provided coverage is taken into account, the 2 surveys show nearly identical figures for 2011: 17,260 (CPS) vs. 17.479 (ACS). For simplicity, I have used the most recent CPS figures from March 2013 and ignored 1.3 million non-elderly who have overlapping employer-based and non-group coverage. Table C-3 shows 30.6 million with non-group coverage, but of these, 11.2 million are age 65 and older, consisting predominantly of elderly Medicare recipients who have purchased Medi-gap policies. Medi-gap policies need to be excluded both because we have already taken Medicare off the table and since the ACA standards do not affect such plans. Of the remaining 19.4 million non-elderly with non-group coverage, 1.3 million also have employer-based coverage, leaving 18.1 million.
 As reported by Anna Gorman and Julie Appleby at Kaiser Health News, Thousands get health insurance cancellation notices: “Florida Blue, for example, is terminating about 300,000 policies, about 80 percent of its individual policies in the state. Kaiser Permanente in California has sent notices to 160,000 people – about half of its individual business in the state. Insurer Highmark in Pittsburgh is dropping about 20 percent of its individual market customers, while Independence Blue Cross, the major insurer in Philadelphia, is dropping about 45 percent.” These figures are consistent with Lasewski’s claim that a large fraction of non-group plans are ineligible for grandfathering.
 See Exhibit M.2.
 See Exhibit 13.3.
 In Landmark: The Inside Story of America’s New Health Care Law and What It Means for Us All David Hilzenrath of the Washington Post writes: “Because employers are likely to change their plans sooner or later–benefits seldom stay frozen for long–it is probably just a matter of time before many employer-based plans must conform to something approaching the full set of new rules.”
 As I explained in a previous post, these are known as “rescissions.” Wharton School insurance professor Scott Harrington has exposed the rather flagrant truth-twisting President Obama engaged in when describing this practice in his speech before a joint session of Congress. Rescissions are far less common than the public has been led to believe–less than 1/2% of the millions of private health insurance policies sold every year.
 The KFF/HRET summary tabulations [Exhibit 3.13] report grandfather status for large firms (200 or more employees) and small firms (under 200). But they also report grandfather status for 6 firm size categories ranging from 3-49 to 1,000 or more. I have combined these with their reported estimates of the distribution of employer-provided coverage in those same size categories to recover the grandfather status of small firms (under 50) and large firms (50 and over). In 2011, 62.8% of covered workers in small firms were in grandfathered plans versus 48.9% in 2013. In large firms, the share of covered employees in grandfathered plans dropped from 52.9% to 29.8% over the same time period. For all covered workers, those in grandfathered plans fell from 56% in 2011 to 36% in 2013. Thus, Mr. Axelrod arguably would have been technically correct had he made his statement in 2011 when he was still a White House senior advisor. But given that only those in grandfathered plans are permitted to keep them, the identical statement in 2013 is manifestly false.
 This includes 16.8 million in plans having to remove their cap on annual benefits (with attendant premium increase) plus the 70% in plans that are no longer grandfathered and hence subject to a variety of benefit “enhancements” (again, with attendant premium increases). I have eliminated the overlap between these 2 groups by subtracting 70% of the 16.8 million, i.e., 16.8m. + (139.6m. x 70%) – (70% x 12% x 139.6m.) = 102.7 million.
 As the president himself once said, “the only people who don’t want to disclose the truth are people with something to hide.” And yet we’re learning this week that the White House has pressured insurance companies to keep quiet about problems with the rollout, including the reasons many insurers are forced to drop coverage in such large numbers.