Blog No. 17 Health Insurance Cancellations: The Continuing Mystery and the President’s Tap Dance.

Rinocracy.com was among the first to call attention to the fact that Obamacare had led to the cancellation of hundreds of thousands of health insurance policies with millions more cancellations likely to follow. We pointed out, as others had, that such cancellations appeared to make a mockery of President Obama’s oft-repeated pledge that “If you like your health insurance, you can keep it.” (Special Bulletin, October 27, 2013, “What did the President know and when did he know it (or Who’s minding the store?).”  Indeed, Glenn Kessler, Fact Checker for The Washington Post has now given the President his highest “award:” Four Pinocchios.

Several responses have emerged from the various defenders of Obamacare. First, it has been said that the policies already canceled or to be canceled represent only a small fraction of all insured. Second, some have urged that the canceled policies were so substandard that they hardly counted as “insurance.” (James Carville, for example, argued that you can call a bicycle a car, but that doesn’t make it a car.) Third, it was even claimed by some that the cancellations were not actually required by the Affordable Care Act (ACA), but were just business decisions made by the insurers. Finally, it was asserted that it all didn’t really matter because better and cheaper coverage would be available on the exchanges.

The first response, as to the number of actual and potential cancellations is accurate but unpersuasive. Surely a “small fraction” that amounts to many millions of people is hardly inconsequential. Each of the remaining responses is contradicted by anecdotal evidence from numerous individual insureds who have reported that that a) they were satisfied with their existing policy, b) that comparable coverage was only available at a substantially higher cost, and c) that their insurer attributed the cancellation to Obamacare.

Anecdotal evidence, not subject to cross-examination and review of underlying documents, has its limitations. What is clearly needed is a thorough and objective (and as non-partisan as possible) review of actual cancellations to determine the facts. Central to such an examination would be hearing from voices that have been curiously silent: those of the insurers themselves. Let Congress call on the insurers who have canceled policies, or will do so shortly, to provide their perspective on exactly why policies were canceled and to compare the costs and benefits of the canceled policies with those available on exchanges.

In the meantime, we have the speech by the President in Boston, which on examination raises as many questions as it answers. Excerpts from the speech have been italicized below with pertinent comments and questions. To allay any concern about excerpts being taken out of context, the entire portion of his address dealing with policy cancellations is available at the end of this blog post.

Obama Statement 1. Now it is also true that some Americans who have health insurance plans that they bought on their own through the old individual markets are getting notices from their insurance companies suggesting that somehow because of the Affordable Care Act, they may be losing their existing health insurance plans. This has been the latest flurry in the news.

Questions. Do the notices merely “suggest” that or do they state it? If they state it, weren’t they exactly correct in the case of policies that had been modified (in even minor ways) after adoption of the ACA (e.g. a slight premium increase) and were therefore not “grandfathered”?

Obama Statement 2. And there are a number of Americans, fewer than 5 percent of Americans, who’ve got cut-rate plans that don’t offer real financial protection in the event of a serious illness or an accident.

Questions.  Isn’t “5 per cent of Americans” more than 15 million people? By some estimates the number of individual insureds exceeds 19 million, but isn’t even 15 million a significant number? Does your description of “cut-rate plans that don’t offer real financial protection in the event of a serious illness or accident” fairly and accurately apply to all the policies that have been canceled as non-compliant? Isn’t it a fact that HHS regulations require policies to include numerous minimum benefits wholly unrelated to “real financial protection in the event of a serious illness or accident” (e.g. pre and post natal care, preventive and wellness service)?

Obama Statement 3. Remember, before the Affordable Care Act, these bad apple insurers had free rein every single year to limit the care that you received or used minor pre-existing conditions to jack up your premiums or bill you into bankruptcy.

Questions.  The major portion of the policy cancellations so far have been by Kaiser Permanente and BlueCross/BlueShield. Do you consider them to be “bad apple insurers”? If not, whom did you have in mind?

Obama Statement 4 Now if you had one of these substandard plans before the Affordable Care Act became law and you really liked that plan, you were able to keep it. That’s what I said when I was running for office. That was part of the promise we made. But ever since the law was passed, if insurers decided to downgrade or cancel these substandard plans, what we said under the law is, you’ve got to replace them with quality, comprehensive coverage because that too was a central premise of the Affordable Care Act from the very beginning.

Questions.  Isn’t it a fact that your repeated assurances about the ability to keep one’s insurance never disclosed the fact that a minor modification to a policy would destroy the insured’s “grandfathered” right to keep it? [As documented by Glenn Kessler: “If you dig into the regulations (go to page 34560), you will see that HHS wrote them extremely tight. One provision says that if co-payment increases by more than $5, plus medical cost of inflation, then the plan can no longer be grandfathered. (With last year’s inflation rate of 4 percent, that means the co-pay could not increase by more than $5.20.”)]

Obama Statement 5 So if you’re getting one of these letters, just shop around in the new marketplace.

Question. Isn’t it a fact that your repeated assurances never made the slightest mention of getting cancellation letters that would require insureds to “just shop around in the new market place”?

Obama Statement 6 For the fewer than 5 percent of Americans who buy insurance on your own, you will be getting a better deal. So anyone peddling the notion that insurers are canceling peoples’ 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.

Questions.  How do you account for the fact that many insureds report having to pay a higher premium for comparable (or less desirable coverage? If they are telling the truth, isn’t it “grossly misleading” to “leave that stuff out.”  Has HHS prepared any comprehensive analysis comparing the costs and benefits of policies that have been canceled with policies that will be available on exchanges? If so, will it be released to the public?

Obama Statement 7. Now, there’s a fraction of Americans with higher incomes who will pay more on the front end for better insurance with better benefits and protections like the patient’s bill of rights, and that will actually save them from financial ruin if they get sick.

Questions. What “fraction” do you have in mind? What counts as “higher incomes” in this context? How and by whom was that determined? How much more are the “Americans with higher incomes” expected to pay? Their higher payments are used to subsidize those with lower incomes, are they not?

CONCLUSION

While many whose policies have been canceled may be able to get a “better deal” on the exchanges, it seems highly unlikely that that will be universally true, and indeed, it is impossible to know the proportion for whom it will be true.  Whatever the case turns out to be, it has little to do with the misleading character for the President’s assurances.  Taking his own arguments at face value, a more accurate assurance might have been something like this:

For those 15-20 million of you who have individual health insurance policies and like them, you will be able to keep them–unless your insurer makes some change in the policy, such as a premium increase, after the new law is passed. If that happens, your policy will be canceled, but you can then go onto one of the exchanges and shop around. Once on the exchange, you may be entitled to a subsidy (but we can’t tell you in advance what that will be). On the exchange, you will obtain the many-faceted coverage that you may believe is unnecessary in some respects, but which we believe is good for you. And with or without a subsidy, and without knowing what your premium will be, we are sure it will be a better deal than your old insurance. If you are a higher income American, you can count on paying a higher premium, but you will have the satisfaction of knowing that you are helping to provide that broad coverage for those who are less well off.

Hmmm. It doesn’t exactly fall trippingly off the tongue, but it would have had the merit of being honest.

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Obama’s Address in Massachusetts – The Full Context 

There’s — because there’s been a lot of confusion and misinformation about this, I want to explain just what’s going on.

One of the things health reform was designed to do was to help not only the uninsured but also the underinsured. And there are a number of Americans, fewer than 5 percent of Americans, who’ve got cut-rate plans that don’t offer real financial protection in the event of a serious illness or an accident.

Remember, before the Affordable Care Act, these bad apple insurers had free rein every single year to limit the care that you received or used minor pre-existing conditions to jack up your premiums or bill you into bankruptcy. So a lot of people thought they were buying coverage, and it turned out not to be so good.

Before the Affordable Care Act, the worst of these plans routinely dropped thousands of Americans every single year. And on average, premiums for folks who stayed in their plans for more than a year shot up about 15 percent a year. This wasn’t just bad for those folks who were — had these policies; it was bad for all of us, because, again, when tragedy strikes, and folks can’t pay their medical bills, everybody else picks up the tab.

Now if you had one of these substandard plans before the Affordable Care Act became law and you really liked that plan, you were able to keep it. That’s what I said when I was running for office.

That was part of the promise we made.

But ever since the law was passed, if insurers decided to downgrade or cancel these substandard plans, what we said under the law is, you’ve got to replace them with quality, comprehensive coverage because that too was a central premise of the Affordable Care Act from the very beginning.

And today that promise means that every plan in the marketplace covers a core set of minimum benefits, like maternity care and preventive care and mental health care and prescription drug benefits and hospitalization, and they can’t use allergies or pregnancy or a sports injury or the fact that you’re a woman to charge you more. (Cheers, applause.) They can’t do that anymore. They can’t do that anymore.

If you couldn’t afford coverage because your child had asthma, well, he’s now covered. If you’re one of the 45 million Americans with a mental illness, you’re now covered. If you’re a young couple expecting a baby, you’re covered. You’re safer. The system is more secure for you and it’s more secure for everybody.

So if you’re getting one of these letters, just shop around in the new marketplace. That’s what it’s for. Because of the tax credits we’re offering and the competition —

AUDIENCE MEMBER: (Off mic.)

PRESIDENT OBAMA: Because of the tax credits that we’re offering and the competition between insurers, most people are going to be able to get better, comprehensive health care plans for the same price or even cheaper than projected. You’re going to get a better deal.

Now, there’s a fraction of Americans with higher incomes who will pay more on the front end for better insurance with better benefits and protections like the patient’s bill of rights, and that will actually save them from financial ruin if they get sick. But nobody is losing their right to health care coverage. And no insurance company will ever be able to deny you coverage or drop you as a customer altogether. Those days are over, and that’s the truth. That is the truth. (Cheers, applause.)

So for people without health insurance, they’re finally going to be able to get it. For the vast majority of people who have health insurance that works, you can keep it. For the fewer than 5 percent of Americans who buy insurance on your own, you will be getting a better deal. So anyone peddling the notion that insurers are canceling peoples’ 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. (Applause.)

But frankly, look — you saw this in Massachusetts. This is one of the challenges of health care reform. Health care is complicated, and it’s very personal. And it’s easy to scare folks. And it’s no surprise that some of the same folks trying to scare people now are the same folks who have been trying to sink the Affordable Care Act from the beginning. (Applause.)