Obamacare: Even If You Like Your Plan, You Can’t Keep It

Published December 22, 2011

One of the most fervent promises President Obama made to the American people before passage of the health overhaul law was, “If you like your health care plan, you will be able to keep your health care plan. Period. No one will take it away. No matter what.”

But, even before the law fully takes effect, millions of people are losing “the coverage they have now,” and tens of millions more surely will follow.

Employers Dropping Coverage

A survey by McKinsey & Company found 45 to 50 percent of U.S. employers say they will definitely or probably pursue alternatives to employer-sponsored health insurance after Obamacare takes effect in 2014. One-third of employers say they “will definitely or probably drop coverage after 2014.” Among employers who knew most about the new law, half said they were likely to drop coverage.

Since an estimated 156 million non-elderly Americans get health insurance at work, according to the Employee Benefit Research Institute, 78 million people could be forced to find other sources of coverage. Already many are losing their preferred coverage as health insurers drop out of marketplace.

Carriers are leaving markets all across the nation, largely because of the combined effect of the health care law and state regulations that make it particularly difficult to offer coverage in the small-group market. Some of the carriers are exiting because of onerous state regulations, and others are victims of a faltering economy, but the cascade has been accelerated by the rules that already have taken effect and the many more to come as a result of Obama’s law.

The American Enterprise Group announced in October 2011 it would stop offering non-group health insurance in more than 20 states. As a result, 35,000 people will lose their health coverage. The company cited regulatory burdens, including the “medical loss ratio” (MLR) requirements, in explaining its decision to leave the markets. This means there will be less competition in these 20 states, resulting in higher prices for consumers in many cases.

Losing Coverage Now

In New York, Empire BlueCross BlueShield said it will drop, in the spring of 2012, health insurance plans covering about 20,000 businesses in the state. Mark Wagar, president and CEO of Empire, said the company will eliminate seven of the 13 group plans it currently offers to businesses which have two to 50 employees. The move is expected to have a great and potentially “catastrophic” impact on small businesses in New York, said James L. Newhouse, president of Newhouse Financial and Insurance Brokers.

In Colorado, World Insurance Company/American Republic Insurance Company announced in October 2011 it is leaving the individual market, citing the company’s inability to comply with insurance regulations. Aetna will stop selling new health insurance to small groups in the state and is moving existing clients off its plans this year, affecting 1,200 companies and 5,200 employees and their dependents, and has pulled out of Colorado’s individual market because of concerns about its ability to compete there, dropping 22,000 members.

Aetna also has dropped out of the small-group market in Michigan and several other states.

In Indiana, nearly 10 percent of the state’s health insurance carriers have withdrawn from the market because they are unable to comply with the federal medical loss ratio (MLR) requirement. Indiana was hoping to bring the companies back by asking the Department of Health and Human Services (HHS) for a waiver from the rule, but in late November 2011 the Obama administration refused to grant the waiver.

The MLR rules are particularly difficult to meet for plans such as health savings accounts which offer high-deductible coverage, and Indiana has a particularly high concentration of the popular cost-saving plans. Indiana had proposed an alternative approach to phase in the MLR triggers, but it was denied by HHS.

Exodus Continues

In Virginia, UniCare has eliminated its individual market coverage for about 3,000 policyholders. And shortly after the health law was enacted in 2010, a new Virginia-based company, nHealth, announced it was closing its doors, saying the regulatory burdens posed by Obama’s health care law made it impossible to gain investor support to continue operating.

Since June of 2010, 13 plans have left the health insurance market in Iowa, citing regulatory concerns. The Principal Financial Group, based in Iowa, announced in 2010 it would stop selling health insurance, impacting 840,000 people.

The list goes on. Cigna announced it is no longer offering health insurance coverage to small businesses in 16 states and the District of Columbia. In New Mexico, four insurers—National Health Insurance, Aetna, John Alden, and Principle—are no longer offering insurance to individuals or small businesses. In Utah, Humana is ending its participation in the Utah Health Exchange, leaving only three carriers participating in the exchange.

These announcements that carriers are exiting markets represent an accelerated trend the American Medical Association says leaves four out of five metropolitan areas in the United States without a competitive health insurance market. They are just the latest in a series of announcements that health insurers are leaving the market as a result of Obamacare edicts.

Without a change in direction, there are many more to come.