The GW Center on Health Insurance Reforms offers this explanation on the individual insurance cancellations – Policy Cancellations – Another Tempest in a Teapot?
Having an insurance company discontinue an insurance policy is not anything new. And actually, the term “policy cancellation” is a misnomer. Generally, an individual health insurance policy is sold via a 12-month contract between the insurer and the consumer. At the end of that contract period, the insurer has the option to discontinue or change that policy – nothing in federal law changes that. Current policyholders are not having their current policy cancelled – rather, the insurance company is exercising its option to discontinue the policy at the end of the contract year.
Ross Douthat writes in the NY Times – Obamacare’s Losers and Why They Matter
On the policy substance, meanwhile, despite his kind nod to our “reasonable” disagreement, I actually strongly agree with Cohn that it’s fair to ask some people to pay more for the health insurance they currently have in order to make health insurance more accessible to the currently-uninsured. As I’ve noted before, during the exciting debate about “bros” and health care reform early this year, every plausible conservative alternative to Obamacare does that in some form or another — and part of the reason that Republican politicians have been hesitant to embrace those alternatives, unfortunately, is an anxiety about precisely this reality and its potential political costs.
But not every form of “asking some people to pay more” is created equal. A cap on the tax break for employer-provided health insurance, for instance — which is central to most right-of-center health care proposals, and is taking effect in a more limited way in the form of Obamacare’s so-called “Cadillac tax” on expensive insurance plans — basically asks people who have been getting a very good deal from current health care policy (the well-off and upper middle class, and some union members with generous benefit packages) to live with a somewhat smaller subsidy and somewhat less generous employer coverage going forward. (For a more specific illustration of how this works, you can read Josh Barro explaining it using the example of Senator Ted Cruz and his wife.) This policy change isn’t cost free, and it would still violate President Obama’s unwise “if you like your plan, you can keep it” pledge. But it promises to level the health-insurance playing field somewhat while asking the most from those Americans who have benefited from its existing tilt.
But “rate shock” seems different, because premium increases in the individual market creates a set of Obamacare losers within a group of people who weren’t obviously winners to begin with. A couple like the Harrises of Fullerton, California, for instance, making $80,000 a year and buying on the individual market in a high cost-of-living state, were already disadvantaged relative to the millions Americans who get insurance through an employer and benefit from the employer tax break; now they’ll be paying an extra $1500 a year as well (albeit, yes, perhaps for more comprehensive coverage). Likewise some of the hypothetical Connecticut residents discussed in my column: If you’re 50 years old in my native state, make $50,000 a year, and buy on the individual market, you’re thrice a loser under the new system. You don’t benefit from the employer tax deduction, you don’t qualify for the new subsidies, and your insurance prices could be jumping by $200 a month.
So is this much ado about nothing? Is this a Fox News crisis? Or is this a fundamental problem for public acceptance of the law? The web site will get fixed. But what happens a year from now when business health plans must comply?
I want this to work, but the individual cancellation story (started by investigative reporting at the LA Times) does bother me. Is it fair to blame this problem on the insurance companies solely?
