This fall, thousands of Americans are learning that they can’t keep their insurance policies next year because the coverage doesn’t meet the standards set in the 2010 healthcare law. The only alternative for many will be more comprehensive policies at a higher price. The cancellations have caused a new wave of outrage against the law and President Obama, who repeatedly pledged that “if you like your healthcare plan, you can keep it.”
Obama clearly overpromised — not everyone can keep the plans they’ve signed up for since the new law passed. That’s because one laudable purpose of the Affordable Care Act was to eliminate threadbare health plans that covered too little and left policyholders vulnerable to bankruptcy in the event of a major illness or injury. The president should have stated more plainly that some plans wouldn’t pass muster.
The question now is whether the people losing their policies will sign up for new ones or go uninsured, undermining the law before it has a chance to succeed. The cancellation notices are going primarily to the 5% of the population covered by individual insurance plans, the main target of the law’s reforms. Analysts estimate that more than half of those plans don’t meet the new requirements to cover at least 60% of the cost of 10 essential health benefits (such as hospitalization and prescription drugs) and to limit out-of-pocket costs to $6,350 for an individual or $12,700 for a family.
The essential benefits and cost limits are meant to prevent people with insurance from being bankrupted by medical bills — a distressingly common occurrence. But they’re also part of a larger effort in the law to stop insurers from cherry-picking customers, leaving those who may need expensive treatments unable to find coverage. The law will force risks to be pooled and costs shared in the individual market just as they are in employer plans, where younger, healthier workers subsidize older, sicker ones.
Such reforms are badly needed. But the sudden shift to more comprehensive coverage and shared risks will drive up costs for many people who’ve benefited from the current system’s bias in favor of the young and the healthy.
The risk is that the cancellations will lead those least in need of healthcare to opt for no insurance, paying only the (relatively small) federal tax penalty. If that happens, it could cause premiums for those not covered by group plans to spiral upward, leading to even more people going uninsured. Lawmakers need to guard against such a vicious cycle without abandoning the efforts to improve insurance coverage for all Americans.