WASHINGTON – President Obama’s broken promise about people being able to keep their existing health insurance is much larger than we’ve been led to believe. Until now, attention has focused on the individual insurance market: people buying coverage for themselves and their families from insurance companies. Policies have been canceled because they don’t comply with the Affordable Care Act (ACA). But the individual market is small, representing about 5 percent of the non-elderly population, according to the Kaiser Family Foundation. What’s unappreciated is that cancellations, under today’s law, will ultimately spread to the largest insurance market: employer-provided coverage.
So Chapter Two of the broken promise looms. In 2012, 171 million Americans received health insurance from their employers, reports the Census Bureau. This dwarfs Medicaid (51 million) and Medicare (49 million), the next largest sources. Given the ACA’s complexity, it’s hard to know how many Americans with employer coverage might be hit by policy cancellations. But plausible assumptions suggest between 25 million and 50 million, mostly at small firms. Just because policies are canceled, of course, doesn’t mean people lose insurance. Gary Claxton of Kaiser says that modest modifications – presumably at some extra cost – might bring many plans into ACA compliance. Still, it seems increasingly clear that the ACA was sold on a premise that simply isn’t true.
The debate’s tenor was that the coverage mandated by the law would be an add-on to the status quo. As the president said, “If you like your plan, you can keep your plan.” The pledge was not a one-time exaggeration but a regular part of the administration’s pitch. The White House faced a dilemma. On the one hand, it didn’t want to scare people satisfied with their insurance; they had to be reassured. On the other, it wanted to define some basic level of “essential benefits” provided by insurance; otherwise, individuals and firms could buy flimsy policies to comply with the law’s insurance mandates. So, for example, the ACA imposes an upper limit on patient deductibles: $2,000 for single coverage, $4,000 for a family. Policies with higher deductibles generally would not comply with the ACA. But the goals collide: The stricter the standards for mandated coverage, the harder it becomes for existing policies to comply – and the more likely they’ll be canceled. That’s now happening in the individual market. For legal reasons, most potential cancellations in the employer market are probably at least a year away. The employer market divides into two parts. Most big firms (the IBMs, Procter & Gambles) self-insure. They define workers’ benefits and pay the costs directly. The ACA largely exempts these plans from the “essential benefits” standards on the apparent assumption that the plans are generous. When the president said people wouldn’t lose their existing coverage, he was probably referring to self-insured firms.
About 60 percent of workers with employer-provided insurance receive it from these companies, according to government figures. The other 40 percent get it from mostly smaller firms that buy coverage from insurance companies. The ACA “grandfathered” policies that existed when the law was passed. People could (as Obama promised) keep those plans, even if they didn’t meet the law’s standards. But there was a big catch that largely nullifies this protection: Minor changes to existing policies would cause firms to lose their “grandfathered” status. Not surprisingly, that’s happened. In 2014, perhaps three-quarters of small firms (fewer than 100 workers) will no longer be grandfathered, estimates economist Stan Veuger of the American Enterprise Institute, a conservative think tank. How many people might be affected by cancellations is unclear. Veuger’s estimate of vulnerable firms implies a maximum of about 50 million workers and dependents, but it could be much lower. Still, even half of that would be a lot. Cancellations won’t hit immediately, because the administration allowed firms to renew existing policies through most of 2014. Interestingly, though the ACA doesn’t require firms with fewer than 50 full-time workers to provide insurance, they must comply with the ACA’s standards if they do buy it. This might cause some firms to drop coverage. Embarrassed by cancellations in the individual market, the White House has urged states – which approve insurance policies – to allow old policies to be renewed for another year. It’s also requested a further extension of existing policies in the small-employer market. Most states are considering the requests. Meanwhile, it’s an open question whether the ACA would have been enacted if its supporters had acknowledged that millions of Americans couldn’t keep their old plans.
Robert Samuelson’s column is distributed by The Washington Post Writers Group.