Obama Lied. My Health Plan Died. That is the new mantra of critics of President Obama in the wake of news that millions of Americans are receiving notices that their health insurance policies have been cancelled. He promised Americans that if they liked their current plan, they could keep it. So he lied.
It is true that when he was advocating for his plan back in 2009, President Obama did not say that those Americans with individual insurance policies that fall below the minimum threshold for adequate health care coverage will lose that insurance. He should have made that clear. Perhaps he was unaware how many policies would be affected.
Nevertheless, it is important to put into perspective what is happening. First, these were private policies individuals bought since 2010 because their employer did not provide coverage. These people wanted some kind of insurance and were desperate for policies that provided some coverage for them. Approximately three-fourths of Americans with health insurance are on employer-based plans. For the most part, those are not the plans affected by this mass cancellation notice.
That does not minimize the effect on those millions who are receiving notices, but it does remind us how limited this mass cancellation is relative to the number of Americans with health insurance. An estimated 10 million Americans may be affected by health care policy cancellations. According to the U.S. Census Bureau, there were 263 million Americans with health insurance policies in 2012.
Second, these policies have been cancelled because they don’t measure up to what the law requires health insurance companies do for their clients. For example, under the law now, an insurance company cannot turn down an individual because of a pre-existing condition, nor can they drop them whenever they become expensive (in other words, sick). The law now says a company cannot force an individual to make out-of-pocket expenses above $6, 350. That means they can’t cover someone so little that, when a medical catastrophe happens, the individual is forced into bankruptcy to pay their medical bills.
These are all good changes. They force insurance companies to cover essential health benefits such as prescription drugs, maternity and newborn care, hospitalization, and mental health services. Now, insurance policies cannot market policies to people supposedly offering them coverage that will not actually cover them.
Federal regulations that protect the consumer are beneficial for all of us, even if it means taking a product off the market. For example, the federal government no longer allows the manufacture and sale of cars without seat belts or air bags. Some Americans may complain that they don’t have the opportunity to buy new cars without those features today, but all of us are safer when such automobiles are removed from the roads.
Similarly, all Americans are better off when health insurance companies are required to meet minimum standards in what they market as health insurance. No longer will consumers be left in a wild, wild west-style marketplace where insurers can offer whatever they want and call it health care insurance. Nor can they pick and choose who they want to provide the service to, depending on whether that individual will cost the company money.
Third, the practice of health insurance companies cancelling policies is nothing new. They’ve been doing it for years to people they didn’t want to cover. The difference is the news media didn’t tell us about those cancellations.
Fourth, those who received cancellation notices likely will have more options for better and cheaper coverage than they do now. They can take the higher-priced alternatives offered by their existing companies or, better yet, they can shop around on HealthCare.gov when the site becomes functional. Also, many of those with cancelled policies will now qualify for tax subsidies through health care exchanges. And their policies do not end immediately, but at their renewal period.
Undoubtedly, this is a dislocation for many people receiving the notices, particularly since they believed no change would be necessary. Indeed, they will have to find new health care insurance policies within the next few months. But it is not as widespread or as dire as the long term critics of Obamacare claim.
Richard Davis is a professor of political science at Brigham Young University. His opinions do not necessarily reflect those of BYU.