How the Obama Administration Made Sure People Couldn’t Keep Their Plans

By Patrick Brennan 

 

Much derision has been heaped on White House consigliere Valerie Jarrett’s tweet last night claiming that “nothing in #Obamacare forces people out of their health plans. No change is required unless insurance companies change existing plans” (this is a “FACT,” she noted). There’s actually a little truth to this: Technically, individual-market plans that qualify as grandfathered under the ACA are exempt from some of the law’s mandates — but not all of them. As long as a grandfathered plan doesn’t undergo any “material changes” after 2010, it maintains its grandfathered status, so it doesn’t have to comply with all of the law’s strictures as other plans do on January 1. But those material changes are almost inevitable, in large part because of the ACA — meaning the plan will almost certainly be cancelled and replaced with a more expensive, more comprehensive plan, as millions of Americans have learned and continued to learn. 

 

There are two, related liberal objections to the idea that the ACA has caused this disruption: One, from Jarrett and more pointedly from ThinkProgress’s Igor Volsky, is that this is because the evil insurance companies are changing their plans to charge you more, and Obamacare thus has to step in to solve the problem. The related complaint, is that, as Chuck Todd put it on Morning Joe this morning, “the insurance companies are taking advantage of this” to cancel plans, as if the ACA was coincidental to the material changes insurance companies were planning to make anyway. This isn’t true. 

 

Volsky wrote, “If insurers make changes that significantly burden enrollees with lower benefits and increased costs they have to come into compliance with all consumer protections.” Indeed, insurers lose their grandfathered status if the plan has a “material change,” defined as:

 

(1) eliminating or significantly reducing benefits; 

 

(2) raising co-insurance or co-payments; 

 

(3) raising deductibles; 

 

(4) reducing employer contributions; or, 

 

(5) adding or increasing an annual limit” (for a more detailed description of these limits, see here). 

 

Meanwhile, even these grandfathered plans have to comply with a number of new Obamacare mandates — most important, they have to accept applicants regardless of preexisting conditions and charge them the same premiums, they have to eliminate lifetime-spending caps, and they have to cover dependents under 26 for free (there are other rules that also apply to grandfathered group plans). How, exactly, were health insurers supposed to comply with these new mandates (and other ways the ACA is raising costs) without raising customers’ contributions in the way the law says means losing grandfathered status? Obviously, they could have chosen to raise premiums alone — but then customers who don’t expect to use a lot of health care would switch to plans with higher cost-sharing, which ruins an insurance pool.

 

In other words, the ACA did make it incredibly hard for insurers to continue plans for the millions of Americans who don’t want comprehensive insurance — financially, insurers almost certainly had to adjust them in such a way that they would lose grandfathered status. This isn’t “normal turnover in the insurance market” (though there is plenty of that in the individual market); there’s a reason why an exceptionally large number of Americans are getting cancellation notices this fall.

And it might even be more deliberate than that: Jim Capretta points me to this post from Doug Badger, which suggests that this isn’t actually how the law was written in the first place. The infamous grandfather section reads as follows: “Nothing in this Act (or an amendment made by this Act) shall be construed to require that an individual terminate coverage under a group health plan or health insurance coverage in which such individual was enrolled on the date of enactment of this Act.” In other words, if you like your health-care plan, you can keep it. But then the Obama administration went about making it impossible, by issuing the regulations described above in June of 2010, in which it explained:

The statute does not, however, address at what point changes to a group health plan or health insurance coverage in which an individual was enrolled on March 23, 2010 are significant enough to cause the plan or health insurance coverage to cease to be a grandfathered health plan, leaving that question to be addressed by regulatory guidance.

The Affordable Care Act as written and passed would have protected the grandfathered plans for a longer period of time and with more freedom for adjustment, but the Obama administration filled out the Secretary Shalls in such a way as to make that much harder, if not basically impossible, to do. The Obama administration’s original, June 2010 rules were actually even stricter, and would have, for example, made it impossible for an insurer or company to change the firms it uses to manage and administer the plan (which needn’t affect coverage and is a simple way to lower costs); those ludicrous restrictions were eliminated, but enough rules remain that it’s, again, near impossible to maintain a grandfathered health-care plan.