Obamacare puzzle takes new twists and turns

The Rubik's Cube that is healthcare reform might have become even more puzzling for some people Thursday after the operator of California's online insurance exchange rejected President Obama's call for extending the life of canceled policies.

Covered California said it'll stick with its Dec. 31 deadline. All plans that don't comply with the requirements of Obamacare must go adios by that day.

Unless, that is, they've been grandfathered in.

Color June Maguire confused.

The 88-year-old Mission Viejo resident was among numerous people who have contacted me in recent days to ask what's what with the Affordable Care Act and what's this grandfathering thing all about anyhow?

"It seems like they can't figure everything out," Maguire told me. "It's hard to know what to think."

I'll get to her questions in a moment. First, one easy point to address: the effect of the reform law on Medicare.

Maguire and more than 49 million other Medicare beneficiaries have little to worry about.

"Medicare isn't part of the health insurance marketplace established by ACA, so you don't have to replace your Medicare coverage with marketplace coverage," says the federal government's Medicare.gov website.

"No matter how you get Medicare, whether through original Medicare or a Medicare Advantage plan, you'll still have the same benefits and security you have now," it says.

Because of Obamacare, higher-income beneficiaries — the 5% who earn more than $85,000 per person or $170,000 per couple — will pay slightly more for prescription drug coverage.

But the vast majority of seniors eventually will see their pharmacy costs go down thanks to the reform law closing the so-called doughnut hole of Medicare Part D, which had forced people to pay the full cost of meds up to a certain amount.

OK, so let's get to Maguire's questions.

"There's a nest of right-wing Republicans in my community," she said. "I hear all sorts of things about Obamacare, and I wonder if many of them are false."

For example, there's the law's "grandfather clause." What is it, Maguire asks, and how does it affect people's insurance plans?

This question is at the heart of the recent fuss over whether Obama lied when he repeatedly said that if people are happy with their current insurance, they can keep it.

"The president oversimplified this to the American people," said Gerald Kominski, director of UCLA's Center for Health Policy Research. "He shouldn't have done this."

The reality, he said, is that it was never up to the policyholder as to whether he or she could keep a particular plan. It was always up to the insurer to continue offering that plan.

Obamacare requires that all plans meet minimum standards for coverage, such as including maternity care, emergency services and chronic-disease management.

A plan that existed prior to March 23, 2010 — the day Obamacare was signed into law — could be grandfathered in even if it didn't meet these standards, but only if the insurer agreed to not make any significant changes, such as raising the deductible or cutting a benefit, and to not enroll additional people.

This means an insurer would have few incentives for grandfathering in a plan. And even if it did, the insurer could still cancel the plan at any time.

Dylan Roby, an assistant professor of health policy and management at UCLA's Fielding School of Public Health, said the Affordable Care Act was predicated on the idea that, sooner or later, all people in the individual market would make their way to the insurance exchange.

This would happen either because a grandfathered plan went away or because a policyholder realized that he or she could receive superior coverage for not much more money, or in many cases a lower monthly price.

"The law was designed to allow people to keep their crappy, low-benefit, high-deductible plan if they wanted, and if the insurer kept offering it," Roby said. "But the idea was that most people would eventually leave these plans."

Maguire's second question is along these same lines: Why are so many plans being canceled?

More than 19 million Americans have coverage purchased in the individual insurance market, according to an industry trade group.

Approximately 250 million others are covered by their employer or a government entity. Their plans are largely unaffected by Obamacare.

In California, more than 1 million individual policies have been canceled because they don't meet the state's requirements for the Affordable Care Act. Nationwide, the number of canceled policies may be closer to 5 million.

Maguire said she's heard that insurance companies are using Obamacare as an excuse to force customers into more-profitable plans. Since we're talking about health insurers, I wouldn't put anything past them.

But Paul Gertler, a professor of health policy at UC Berkeley's Haas School of Business, said he hasn't seen anything sinister going on.

"These are the plans that don't meet the minimum requirements of Obamacare and don't qualify for being grandfathered in," Gertler said.

Generally speaking, the people in many of these canceled plans are younger and healthier — the sort of people who can tolerate high deductibles or skimpy coverage because they seldom require medical treatment.

Gertler said many of these folks are crying foul because they're focused solely on price, rather than quality of coverage. Their premiums may rise under Obamacare, he said, but they'll find themselves with significantly better insurance when they need it.

"There's been a big overreaction to these cancellations," Gertler said. "Insurance companies aren't trying to get rid of anyone. They're just complying with the law."

And the law, quite correctly, includes an expectation that everyone should have insurance worthy of the name, and not bare-bones policies that won't do you much good in the event of a serious problem.

Here's my advice to Maguire and others: Whenever someone tells you that Obamacare is a train wreck because so many policies are being canceled, ask where that person's insurance comes from.

If it's not the individual market, where for years people have faced double-digit rate hikes, exclusions for preexisting conditions, loss of coverage when they become sick and limits on insurance payouts, tell that person to chill.

They have no business complaining.

David Lazarus' column runs Tuesdays and Fridays. He also can be seen daily on KTLA-TV Channel 5 and followed on Twitter @Davidlaz. Send your tips or feedback to david.lazarus@latimes.com.

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