Obamacare

You Still Can't Keep (or Afford) Your Insurance Under Obamacare

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Healthcare.gov
U.S. Government

At America magazine, Robert David Sullivan takes me to task for writing "you probably can't keep" your existing individual-market health insurance* under the new Affordable Care Act rules. He objects, "31 million Americans were covered by directly purchased health insurance before Obamacare (in addition to the 171 million Americans who got health insurance through employers), so even hundreds of thousands of cancellation letters don't translate to 'you probably can't keep' your existing plan." Sullivan also points out that insurance under the new rules covers scads of cool new stuff, including mental health, and that's a good thing. Except…his points are side-step what I originally wrote, and dodge the very real problems at the core of Obamacare.

For starters, "hundreds of thousands" of cancellation letters (add in another 76,000 from CareFirst BlueCross BlueShield, in the D.C. area) weren't my sole evidence that many existing policies are noncompliant with the new rules. I also quoted health industry consultant Bob Laszewski to the effect that "about 85%" of existing individual health plans are not compliant and will have to be canceled. The CareFirst cancellations, above, cover about 40 percent of the company's customers in the area around the nation's capital. Florida Blue canceled about 80 percent of its customers' policies. Whether the letters have been sent yet or not, a lot of plans simply don't meet the requirements of the new law and won't survive the transition.

Yes, those new requirements include new coverage, including mental health care. Sullivan emphasizes Kaiser's report that "the new policies will offer consumers better coverage, in some cases, for comparable cost," but skips the line pointing out, "Some receiving cancellations say it looks like their costs will go up, despite studies projecting that about half of all enrollees will get income-based subsidies." The New York Times reports that high premiums on the exchanges is a particular problem in rural areas.

In fact, the requirement for subsidies to bring costs down, and the faliure, in many cases for those subsides to do anything of the sort, are part of the problem with Obamacare. Sold, in part, as a measure to lower the cost of health care, the Affordable Care Act appears instead to be increasing costs and then attempting to shift them around, with the idea that "young invincibles" can be conscripted into the system to bear the burden and subsidize premiums for others. Part of those increased costs comes from mandated coverage (between ten and 50 percent "depending on the state, specific legislative language, and type of health insurance policy" according to the Council for Affordable Health Insurance). The mental health coverage that Sullivan praises is especially costly.

If, despite those cost-shifting subsidies, consumers still experience sticker shock when they go shopping, that's going to drive them away no matter the penalty—especially the young invincibles who don't really want to pay the premiums anyway. That leaves a core of sick patients in the system, driving costs up even higher, which puts upward pressure on premiums… This is what Reason's Peter Suderman calls the "health insurance death spiral."

And you can see some of the evidence for that spiral in the cancellation letters, the mandated "fancy-pants" (as Sullivan puts it) coverage, and the resulting high prices at which customers balk.

*Yes, I know it's not really insurance.