Will You Be Able to Keep Your Current Health Insurance?

Probably not. No promise was repeated more often by Barack Obama than the pledge that, “If you like the plan you are in, you can keep it.” For the vast majority of people, however, this promise almost certainly will not be kept. Here’s why.

Your Employer May Be Forced to Switch to Another Plan

In general, if employers make very few changes to their current plan, that plan will be grandfathered. But most plans will be unable to qualify for grandfather status. A government memorandum makes the following predictions.[1]

• More than half of all employees with employer-provided health insurance will have to switch to a more expensive, more regulated plan, and the number may be as high as two-thirds.
• Among those who will be required to switch plans, as many as 80 percent are employees in small businesses.
• Within three years, more than 100 million people will be forced into a health plan more costly and more regulated than the one they have today.
• Moreover, grandfathering is only a temporary phenomenon. The memorandum suggests that eventually all plans will lose their grandfather status.

A more recent survey of employers by AonHewitt, a human resources consulting service, suggests that this prediction may have been too optimistic: 90 percent of employers expect to lose their grandfather status by 2014.[2]

Your Employer May Drop Coverage Altogether

Most employers will be required to offer health insurance or pay a fine. But since the fine will be as little as one-seventh the cost of the insurance, many employers—especially small employers—may drop their coverage. This will force you and other employees to go to a health insurance exchange for your health insurance. To a modest degree, this has already happened in Massachusetts,[3] with a similar health reform law, and the reaction is likely to be more pronounced in other states. Overall:

• The Congressional Budget Office estimates that 9 million employees will lose their employer plan.[4]
• Medicare’s chief actuary estimates that 14 million employees will lose the coverage they now have and, of those, about 2 million will enroll in Medicaid.[5]
• A former CBO director is predicting a much larger employer response, with 35 million employees losing their current coverage.[6]
• Nearly one-third (30 percent) of clients surveyed by McKinsey reported they would likely drop employee health coverage.[7]

Loss of Medicare Advantage Coverage

As noted, about half of the enrollees in Medicare Advantage (MA) plans (7.5 million people) are likely to lose their coverage and will be forced to return to conventional Medicare—a figure consistent with independent analysis.[8] That process has already started. In 2011, Cigna Corp., Harvard Pilgrim Healthcare, several BlueCross BlueShield plans, and others announced they would not renew Medicare Advantage plans for 700,000 beneficiaries, who must find new policies.[9] If you are able to keep your MA plan, expect higher premiums and fewer benefits in the years ahead.

Loss of Postretirement Coverage

The health reform law removes an important employer tax subsidy. As a result, almost all retirees with employer coverage for prescription drugs (5.8 million out of 6.6 million) are expected to eventually lose it, according to the latest Medicare Trustees report. For example, 3M, with 23,000 US retirees, has announced that it will drop coverage.[10]

Loss of Independent Drug Plans

Seniors who have independently purchased Medicare Part D drug plans are also at risk. In 2007 there were 1,875 plans, while in 2012 there will be only about 1,041 plans—834 fewer than five years earlier.[11] The loss of plans will force seniors to choose a new plan, with possible changes in premiums and co-payments.

Loss of Limited Benefit Plans

More than 1 million Americans currently have a health insurance plan that features “limited benefits,” sometimes called “mini-med” plans. Medical benefits in these plans are capped anywhere from a few thousand dollars to $25,000 or even $50,000 or more annually. Premiums are affordable—a family policy can be as little as $1,000 per year. Many other employees are in health plans that limit annual and lifetime benefits as a way to constrain the cost of coverage. Regulations under the new health reform law, however, ban annual and lifetime limits on medical benefits. They phase out completely by 2014.

As a temporary measure to prevent the possibility of millions of Americans losing their health coverage, the US Department of Health and Human Services has granted 1,722 waivers to more than 4 million people with limited benefit health plans. The waivers will allow these employees to keep their coverage for at least one more year. Some of the organizations that received waivers were staunch supporters of the health reform bill. More than half of the people covered by these waivers are members of labor unions, including the Service Employees International Union, the Teamsters, and United Food and Commercial Workers.[12]

For more about the consequences of the Affordable Care Act, please consult my recent Independent Institute book, Priceless: Curing the Healthcare Crisis.

Notes:

1. “Fact Sheet: Keeping the Health Plan You Have: The Affordable Care Act and ‘Grandfathered’ Health Plans,” HealthCare.gov, http://www.healthreform.gov/newsroom/keeping_the_health_plan_you_have.html.
2. “Employer Reaction to Healthcare Reform: Grandfathered Status Survey,” Aon Hewitt, August 2011, http://www.aon.com/attachments/Employer_Reaction_HC _Reform_GF_SC.pdf.
3. Kay Lazar, “Firms Cancel Health Coverage,” Boston Globe, July 18, 2010, http://www.boston.com/news/health/articles/2010/07/18/firms_cancel_health_coverage/.
4. Congressional Budget Office, “Summary of Preliminary Analysis of Health and Revenue Provisions of Reconciliation Legislation Combined with H.R. 3590 as Passed by the Senate,” March 18, 2010, http://www.politico.com/static/PPM110_100318_cbo _score.html.
5. Centers for Medicare and Medicaid Service, “Estimated Financial Effects of the ‘Patient Protection and Affordable Care Act,’ as Amended.”
6. Douglas Holtz-Eakin, “Labor Markets and Healthcare Reform: New Results,” American Action Forum, May 2010, http://americanactionforum.org/content/labor-markets-and-health-care-reform-new-results.
7. McKinsey & Company, “Employer Survey on US Healthcare Reform,” June 20, 2011, http://www.mckinsey.com/Features/US_employer_healthcare_survey.aspx.
8. Centers for Medicare and Medicaid Service, “Estimated Financial Effects of the ‘Patient Protection and Affordable Care Act,’ as Amended.”
9. Avery Johnson, “Private Medicare Plans Are Retrenching,” Wall Street Journal, November 19, 2010.
10. Janet Adamy, “3M to Change Health-Plan Options for Workers,” Wall Street Journal, October 4, 2010.
11. Jack Hoadley et al., “Medicare Part D: A First Look at Part D Plan Offerings in 2012,” Kaiser Family Foundation, October 2011, http://www.kff.org/medicare/upload/8245.pdf.
12. Chris Jacobs (Republican Policy Committee) review of waiver requests granted by the US Department of Health and Human Services, January 6, 2012.

[Cross-posted at Psychology Today]