Number Losing Coverage Involuntarily Under ACA

 VII. Key Issues: Regulation & Reform >> C. Health Reform >> Affordable Care Act (ACA) >> ACA Impact Analysis >> ACA Impact on Coverage and Access >> Impact on Private Health Insurance Coverage >> Number Losing Coverage Involuntarily Under ACA (last updated 5.30.17)

Overview

  • Obamacare Is a Problem For Much More Than the 5%. “The millions losing their individual policies now will be joined in 2014 by tens of millions who will lose their employer-based policies for the same reason. And for many, the brand-new policies currently offered will be cancelled in 2015 or 2016 because the ACA’s sameness standards are a moving target. An unknown number of Americans will now face a permanent cycle of annual or biennial cancellation and have to search for a new policy because of the ACA’s bizarre grading system.” (Real Clear Markets, 12.12.13)
  • Why You Can’t Keep Your Plan Under Obamacare, Explained in 3 Minutes. “In 2009, President Obama repeatedly told the American people, ‘If you like the plan your health care plan, you’ll be able to keep your health care plan, period.’ However, implementation of the Affordable Care Act, popularly known as Obamacare, quickly led to the debunking of the president’s claim. But why exactly did millions of Americans receive cancellation notices from their health insurance companies? Robert Graboyes, senior research fellow at George Mason University’s Mercatus Center, dug through the Affordable Care Act’s 1,000 pages and came up with a simple way to explain the specific provisions that prompt insurers to cancel plans.” (Daily Signal, 9.22.14)

Employer-Based Coverage

Items are in chronological order.

  • Gruber, Jonathan. A Win–Win Approach to Financing Health Care Reform. New England Journal of Medicine (7.2.09). ACA architect describes impact of the strategy now known as the Cadillac Tax on employer-sponsored coverage. “As the provision of employer-sponsored insurance declines, we could end up with a large new uninsured population that either cannot afford nongroup insurance or cannot obtain it at any price. This possibility would certainly be cause for concern if we were reducing the tax exclusion in a vacuum — but not when the policy would be financing a universal coverage plan in which all individuals would get group rates and would be subsidized as necessary. Thus, any displacement from employer-sponsored insurance will lead not to uninsurance but merely to a shift to a new insurance exchange.”
  • Academy Health. The Affordable Care Act and Employer-Sponsored Insurance for Working Americans. (2011) “As this brief was in press, McKinsey & Co. reported that 30 percent of employers surveyed in 2011 would ‘definitely or probably stop offering ESI in the years after 2014.’… On the other hand, a large-scale shift from ESI to the individual market could dramatically increase the cost of the federal premium tax credits. The cost might be partially offset by a reduction in the current tax expenditure for ESI—if employers converted non-taxable health benefits to taxable wages. If, instead, employers simply dropped coverage or provided other tax-favored benefits (such as higher matching for 401(k) plans), the offsetting revenues might not materialize.”
  • McCosh, CameronLabor Markets and Health Care Reform: New Results. American Action Forum. August 25, 2011. Estimates that up to 35 million workers and dependents will lose employer-based coverage due to employer incentives to drop coverage, make it inadequate or unaffordable.
  • Congressional Budget OfficeEstimates for the Insurance Coverage Provisions of the Affordable Care Act Updated for the Recent Supreme Court Decision (July 2012). Reflects the impact of the Supreme Court decision to make the Medicaid expansion optional for states. CBO estimates that in 2012 and 2013, 1 million gained employer-based coverage, but that starting in 2014, the net number covered through employer plans would be 1 million lower than it would have been otherwise, a figure that will grow to 6 million lower by 2019 (after which the net loss tapers off to 4 million by 2022).
  • Nowak, Sarah A.Christine EibnerDavid M. Adamson and Evan SaltzmanEffects of the Affordable Care Act on Consumer Health Care Spending and Risk of Catastrophic Health Costs. RAND Corporation, October 1, 2013. Using the RAND COMPARE microsimulation model, authors estimate that in 2016, 1.5 million previously insured through employer-sponsored insurance will become uninsured.
  • ACA Architect Emanuel Predicts End of Employer-Sponsored Health Insurance“‘Fewer than 20% of workers in the private sector will receive traditional employer-sponsored health coverage’ by 2025.” (New York Times, 3.21.14)
  • Obamacare Architects Differ on the Future of Job-Based Insurance Coverage. “’It’ll be a matter of a few big employers, blue-chip companies,‘ Emanuel told The New York Times, adding that the dramatic shift from employer-sponsored insurance could be labeled as ‘positive, unintended consequences.’ But Jonathan Gruber, an economics professor at Massachusetts Institute of Technology and another Obamacare architect, argued in the same New York Times article that ‘there’s not going to be massive erosion’ in employer-sponsored health coverage. Gruber also asserted in November that the health law would not affect Americans who get their insurance through their employer. According to The Daily Caller, Gruber told Chuck Todd’s ‘The Daily Rundown’ on MSNBC, ‘This law is really leaving those with employer insurance, those with government insurance alone. We’re talking about a small minority of Americans that buy their insurance through the individual market.’” (The Foundry, 3.25.14)
  • Why Employers Will Stop Offering Health Insurance. “Mr. Emanuel argues that in the next two or three years, ‘a few big, blue-chip companies will announce their intention to stop providing health insurance. Instead, they will raise salaries substantially or offer large, defined contributions to their workers. Then the floodgates will open.’” (New York Times, 3.26.14)
  • Ezekiel Emanuel Further Explains His Prediction That Employers Will Drop Health Insurance. “Our recent interview with Dr. Ezekiel J. Emanuel about his provocative prediction that most employers will abandon health coverage by 2025 struck a nerve with You’re The Boss readers…It’s worth noting that among those readers who identified themselves as small-business owners, there was little disagreement: Most expressed a strong desire to get out of the health insurance business. ‘I have provided health insurance for 30 years and am dropping it in 60 days,’ wrote J of New York. To his employees, he continued, health care costs are an abstraction, ‘and my contributions to it are not clearly recognized. Now they will be.’” (New York Times, 4.7.14)
  • S&P Capital IQ. The Affordable Care Act Shifting Health Care Benefit Responsibility Away From Employers, Potentially Saving S&P 500 Companies $700 BillionApril 30, 2014. “2016 has a very modest 10% of employees transitioned to the exchanges. Over the following few years, more companies make the transition until only a minority (10% of employees) would keep traditional plans in 2020…Companies will count on employee eligibility for government subsidies to obviate the need to continue making the contributions that they have made in the past.”

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  • Envisioning the End of Employer-Provided Health Plans. “By 2020, about 90 percent of American workers who now receive health insurance through their employers will be shifted to government exchanges created by the health law, according to a projection by S&P Capital IQ, a research firm serving the financial industry. It’s not an outlandish notion. Ezekiel Emanuel, an architect of the Affordable Care Act, has long predicted a similar shift. But the scope and speed of the shift is surprising.” (New York Times, 5.1.14)
  • Sunset Looms for Employer Health Plans: Everybody, Into the Exchanges! “A study released last week by financial research firm S&P Capital IQ predicts that by 2020, 9 in 10 workers currently receiving health insurance through their employer will instead be managing their own health plan, 401(k) style, on a government exchange created under Obamacare. The report goes on to estimate that by 2025, the S&P 500 companies — America’s short list of corporate giants — would save $700 billion, or 4 percent of their total value, by discontinuing employee health plans. For all U.S. companies with more than 50 employees, the savings would be closer to $3.25 trillion, the study claims. ‘According to model estimates, employers are set to benefit the most as the government takes on a larger funding role,’ according to the report.” (Bankrate.com, 5.6.14)
  • Much of Increase in 2014 Private Coverage Offset by Loss of Employer Coverage. “With enrollment data now available for the second quarter of 2014, it is possible to construct a complete picture of the changes in health insurance coverage that occurred during the initial implementation of the Patient Protection and Affordable care Act (PPAcA), commonly known as Obamacare. The number of Americans with private health insurance coverage increased by a bit less than 2.5 million in the first half of 2014. Enrollment in individual-market coverage grew by more than 6.2 million individuals, but the number of individuals with employer-sponsored coverage declined by almost 3.8 million. The decline in employment-based coverage offset 61 percent of the increase in individual-market coverage.” (Heritage Foundation, 10.22.14)
  • Recently-Released Videos of ACA Architect Reveal Covert Plan to Gradually Eliminate Employer-Based Insurance Coverage.  “Anyone who has listened to the Gruber tapes has heard Prof. Gruber’s repeated references to the ‘three-legged stool’ that forms the core of Obamacare. However, those who pay close attention to his remarks–variously characterized as ‘arrogant’(Charles Krauthammer), ‘careless’ (New York Times), ‘dumb’ (Ezra Klein), ‘ill-advised and indefensible’ (Times Argus), ‘offensive’ (New York Times), and ‘stupid’ (David Axelrod) – may have detected that Gruber enthusiastically endorses (and Obamacare contains) a more sinister three-legged stool of deception regarding employer health plans.” Conover, Christopher J. (Forbes, 11.24.14)
  • Prepare Now for the Gradual Disappearance of Employer-based Health Insurance. [Opinion] “There are between 150 million and 160 million Americans who depend on employer-based coverage. That’s less than half the U.S. population, a share that will gradually shrink over the next decade for several reasons. First, small-business employers with skimpy plans for their lower-wage workers will eventually begin encouraging their employees to seek coverage on the exchanges… Second, group health insurance among larger employers is rapidly moving toward the ‘more skin in the game’ model.” (Modern Healthcare, 2.6.16)

Non-group (Individual) Coverage

Projections

Several different health reform simulation models projected large declines in the non-group market once Exchange coverage became available. These estimates do not distinguish between individuals who lost their coverage involuntarily and those who elected Exchange coverage because it was a better deal. But these analyses demonstrate that even before the ACA was enacted, policymakers knew or should have known that millions of Americans who purchased their own insurance plans would lose their existing coverage.

  • Congressional Budget Office.
  • DHHS (June 17, 2010). Grandfathered Plans Rule. In the rule related to grandfathered health plans, DHHS projected that 40 to 67% of non-group plans would terminate and therefore relinquish grandfathered plan status. This estimate was based on historical patterns of plan turnover in the non-group market, where one study showed 17% remained in their plan for more than two years and another showed 30% staying in their plan for more than three years.
  • RAND Corporation.
    • February 11, 2010 Study. The first RAND study showed that the number of persons in the non-group market would decline as a result of enactment of a plan similar to the ACA from an expected 17 million in 2013 (with or without the ACA), to 5 million in 2014 and then down to 0 by 2016 (Table 1).
    • September 8, 2010 Study. A second study of the ACA itself provided a more fine-grained look at transitions in coverage showing that of 18 expected in the non-group market in 2013, 14 million would end up with Exchange coverage by 2016 and another 4 million would transition to employer-provided coverage (no one would remain in the non-group market) (Table 3.6).
  • Health Care Policy and Marketplace Review (10.17.13). Of 19 million in the non-group market before stringent new coverage mandates become effective in 2014, an estimated 16 million (85%) are enrolled in plans not eligible for grandfather status. Such individuals will either have to switch to more comprehensive (and expensive) plans upon renewal or will drop coverage entirely.
  • Nowak, Sarah A.Christine EibnerDavid M. Adamson and Evan SaltzmanEffects of the Affordable Care Act on Consumer Health Care Spending and Risk of Catastrophic Health Costs. RAND Corporation, October 1, 2013. Using the RAND COMPARE microsimulation model, authors estimate that in 2016, 2.3 million previously insured through the non-group (individual) market will become uninsured.

Analysis: Initial Cancellations

  • Obama Administration Knew Millions Could Not Keep Their Health Insurance. “Millions of Americans are getting or are about to get cancellation letters for their health insurance under Obamacare, say experts, and the Obama administration has known that for at least three years. Four sources deeply involved in the Affordable Care Act tell NBC News that 50 to 75 percent of the 14 million consumers who buy their insurance individually can expect to receive a ‘cancellation’ letter or the equivalent over the next year because their existing policies don’t meet the standards mandated by the new health care law. One expert predicts that number could reach as high as 80 percent. And all say that many of those forced to buy pricier new policies will experience ‘sticker shock.’” (NBC News, 10.28.13)
  • The Selling of Obamacare: The President’s Claim that No Consumers Would Lose their Policies was Unbelievable. “It’s as though two completely separate conversations have been going on. From day one, the health policy community has correctly seen the Affordable Care Act as an attempt to completely change the health care system. This isn’t even controversial. It’s accepted by all as an undisputed fact. However, no one has ever said this to the American people… Then over the past week or so, the general public woke up to some stunning revelations. It now appears that as many as 10 million people will lose their individual health insurance policies as of January 1.” (Psychology Today, 11.5.13)
  • Why Health Insurance Cancellations Shouldn’t Be a Surprise. “It was always known that the ACA would outlaw millions of existing individual or non-group health insurance policies.  From a policy wonk perspective, that was a no-brainer.  It was self-evident in the law in March 2010 and confirmed in subsequent rules and analyses… What’s frustrating is how it took three and a half years, the failed launch of the federal exchange, and the news media starting to question the administration’s core talking points for anyone to focus on this. Whether you like or dislike the ACA policies, the 19.4 million Americans in the various parts of individual market deserved a heads up.” (ProPublica, 11.5.13)
  • Can You Keep Your Old Insurance? Maybe Not. “After an outcry from people who feared cancellation of their insurance would force them to lose their doctors or pay higher rates for a health plan, the Obama administration said it would allow people to keep the policies for 1 year — even though they might not meet the law’s minimum coverage standards. Earlier this month, officials extended that another 2 years for a total of 3. But there’s still one catch: States don’t have to allow those extensions, and insurance companies don’t have to offer them. Washington state, for example won’t allow those policies that don’t meet ‘Obamacare’ standards to be offered.” (WebMD Health News, 3.19.14)
  • The Obamacare Debate is Far From Over. “A Dec. 26 Associated Press survey found 4.7 million policies were canceled last year as out-of-compliance with ObamaCare’s mandates. Fox News took the AP’s work and has continued updating it. As of March 6, Fox reported that the number of cancellations had grown to 6.3 million. That figure did not include policies canceled in 11 states—Arizona, Arkansas, Massachusetts, Missouri, Ohio, Oklahoma, Rhode Island, Texas, Utah, Vermont and Wisconsin—which represent 24% of the nation’s population. If policies were voided in those states (which did not collect the data) at the same rate as the rest of the country, the total of canceled policies could be around 9.3 million nationally.” Rove, Karl. (Wall Street Journal, 4.10.14)

Actions By States

President Obama decreed in late-2013 that insurance companies could allow older individual policies to continue as written, but left that decision to the states and individual insurers. This Associated Press research (12.26.13) shows that at least 4.7 million Americans received cancellation notices. It also provides details about what decision was made in each state. Eighteen states did not record the number of policy cancelations, so this list is incomplete.

Analysis: Subsequent Cancellations

  • Canceled Health Plans: Round Two. “Cancellations are in the mail to customers from Texas to Alaska in markets where insurers say the policies no longer make business sense… One reason behind the switch is that insurers determined they can make more money selling plans that comply with the Affordable Care Act, often at higher premiums that may be subsidized by the government… ‘We all knew this day was coming that insurance companies would transfer to plans that were fully compliant with ACA,’ said Carmen Balber of Consumer Watchdog, a Santa Monica, Calif.-based advocacy group. ‘That’s a good thing. We supported the delay a year ago because consumers didn’t have the time or ability to appropriately shop for plans … But it’s time.’” (Kaiser Health News, 10.2.14)
  • Humana is Terminating Grandfathered Plans in 11 States This Year. “If your health plan is grandfathered, you have the option to keep it indefinitely. But only if your health insurance carrier continues to offer it. There is no provision in the ACA that requires health insurers to continue to offer a specific plan, or to continue to offer any coverage at all, for that matter… Humana offers individual health insurance in 22 states. The carrier announced in December that they would terminate grandfathered individual health plans in 11 states in 2016: Alabama, Arizona, Colorado, Florida, Georgia, Mississippi, Ohio, Oklahoma, South Carolina, Tennessee and Wisconsin (grandfathered small group plans are not impacted at this point). The plan terminations will begin March 1, and will be effective as of the plan renewal date.” (HealthInsuranceAbout.com, 2.12.16)
  • One Million Reasons Obamacare Made Things Worse. “The lack of competition in these states will inevitably produce rate increases that dwarf the hike decried by Minnesota’s governor. In Oklahoma it has already happened. The average increase for the hapless enrollees of that state will be 76 percent. Alabama enrollees will be hit with a mere 36 percent increase. The final rates aren’t in for the other three states on the single-insurer list, but they will make news. In addition to these states, there will be several others that are likely to have significant numbers of single-insurer counties next year. The Kaiser Family Foundation reports, ‘States with significantly more single-insurer counties in 2017 will likely include Arizona (87% of counties in 2017, compared to none in 2016), Mississippi (80% vs. 0%), Missouri (85% vs. 2%), Florida (73% vs. 0%), North Carolina (90% vs. 23%), and Tennessee (60% vs. 0%).’ The only county that appears likely to remain with no insurer at all is Pinal County, Arizona, the travails of which are discussed above. All of which means that more than a million Americans are going to lose their health plans — again.” Catron, David. (American Spectator, 10.17.16)

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