President Obama and Congress are focused on preventing millions of Americans from losing their insurance plans because of the new health care law, but conservative groups warn that a bigger tidal wave of cancellations is building - and is set to hit just before the 2014 midterm elections.
Insurance companies have been dropping individuals from current plans that do not meet Obamacare’s new requirements, creating a firestorm of controversy and undercutting public support for the president’s signature achievement.
The White House insists that the problem is limited to people who buy their own insurance and have said that group represents only 5 percent of the insurance market.
In the coming year, many small businesses – those with fewer than 50 employees—will be forced to deal with the same dynamic that led to the individual-plan terminations.
Over the summer, the White House lifted for one year the requirement that these companies must offer their employees insurance. But next fall when the mandate kicks in, the plans businesses offer will be subject to the same regulations that are spurring the current wave of cancellations.
Businesses will be forced to make a decision: offer a plan that complies with Obamacare at higher costs or tell employees to find health care on the federal exchange.
“What happens when group plans start receiving cancellation notices?” asked Nathan Mehrens, president of Americans for Limited Government, a conservative group. “The cancellations that we are seeing today only applies to 5 percent of the marketplace. In the coming months we’re going to have to deal with this on a much larger scale.”
Under federal rules, insurers must give consumers a 90-day notice that their policies will be cancelled, and most of those notices are likely to come in the late summer and early fall of 2014, just as the midterm campaigns will be in high gear.
Some employer-based plans are being cancelled already, but consumers aren’t as directly impacted because in many cases their employers are simply switching plans.
“When business plans get cancelled the boss usually tells employees, ‘We’re changing plans,’ and the workers just go along with it,” said Mike Tanner, a health care expert at the libertarian Cato Institute. “They may see that they’re going to have to pay more, but it’s just not as in your face as the individual cancellations.”
As with the individual-insurance-plan cancellations, the Obama administration was aware that insurers also would cancel employer-provided plans in large numbers.
The Department of Health and Human Services warned in 2010 that a majority of employer-based insurance plans could be affected, forcing tens of millions of people to find new coverage.
In June 2010 HHS published an estimate in the Federal Register that 39 percent to 69 percent of employers’ plans would be cancelled or changed in some way.
Experts debate how many of the cancellations are a direct result of Obamacare. Both insurance companies and employers regularly assess and often change plans to save money.
Conservatives blame Obamacare for most of the fallout while the president’s supporters target the insurance companies.
But both sides concede that the cancellations are a political problem for Obama, who repeatedly promised that Americans could keep the plans they had if they liked them even under Obamacare.
The key to Obama’s promise was a provision in the law that would allow millions of plans to be “grandfathered” in, exempting them from the new requirements for more comprehensive benefits.
The Affordable Care Act’s grandfathering language said people could keep the plans they had as long as insurers didn’t make “substantial” changes to them.
HHS subsequently issued regulations that narrowly interpreted the “substantial” changes. To keep from having to meet the new health care law’s minimum required benefits, plans would have to, for the most part, maintain the same co-pays, premiums and out-of-pocket limits that they did before the March 2010 passage of the law.
Critics of the law say that interpretation was intended to force insurers to cancel their plans and to push more Americans onto the federal government exchanges.
With a growing elderly population driving up health care costs by as much as 30 percent each year, those critics say the Obama administration knew the number of grandfathered plans would dwindle rapidly over the years.
A survey by the Kaiser Family Foundation, a leading health care research organization, found this year that 36 percent of employer plans were pre-2010 plans, compared to 56 percent in 2011.