The ticking time bomb of employer and small group insurance plans
We've been hearing about the cancellations of policies being held by people participating in the indivudal insurance market. In reality, that market is relatively small - only about 5% or 15 million policies.
But what about small group insurance plans, purchased mostly by small businesses? And the large group market plans?
The White House has been saying that the overwhelming majority of people in those sectors of the market will get to keep their plans.
Section 1251 of the Affordable Care Act contains what's called a "grandfather" provision that, in theory, allows people to keep their existing plans if they like them. But subsequent regulations from the Obama administration interpreted that provision so narrowly as to prevent most plans from gaining this protection.
"The Departments' mid-range estimate is that 66 percent of small employer plans and 45 percent of large employer plans will relinquish their grandfather status by the end of 2013," wrote the administration on page 34552. All in all, more than half of employer-sponsored plans will lose their "grandfather status" and get canceled. According to the Congressional Budget Office, 156 million Americans--more than half the population--was covered by employer-sponsored insurance in 2013.
Another 25 million people, according to the CBO, have "nongroup and other" forms of insurance; that is to say, they participate in the market for individually-purchased insurance. In this market, the administration projected that "40 to 67 percent" of individually-purchased plans would lose their Obamacare-sanctioned "grandfather status" and get canceled, solely due to the fact that there is a high turnover of participants and insurance arrangements in this market. (Plans purchased after March 23, 2010 do not benefit from the "grandfather" clause.) The real turnover rate would be higher, because plans can lose their grandfather status for a number of other reasons.
How many people are exposed to these problems? 60 percent of Americans have private-sector health insurance--precisely the number that Jay Carney dismissed. As to the number of people facing cancellations, 51 percent of the employer-based market plus 53.5 percent of the non-group market (the middle of the administration's range) amounts to 93 million Americans.
Having a policy cancelled that's part of a group plan is not the same as losing insurance. Most large employers are expected to redo their plans to conform to Obamacare standards. But many won't. In this scenario, those employers will drop insurance altogether and force their employees on to the exchanges.
So in addition to the millions of individual insurance policies being cancelled, you have the prospect of tens of millions more losing coverage through their place of employment and being forced on to the exchanges to obey the mandate for insurance.
The second wave of cancellations should occur just about the time that people start paying attention to politics to make up their minds about who to vote for in 2014. It's also just about the time that insurance companies will unveil new, more expensive policies for the exchanges.
That's a one-two punch that could floor the Democrats in 2014.
Hat Tip: Ed Lasky