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Why health insurance plans are being dropped with Obamacare

Teresa Tanoos's picture
Obamacare and dropped health insurance plans

Are you at risk for losing your current health insurance under Obamacare?


When President Obama promised Americans that if they liked their health insurance, they could keep it, millions learned that wasn't true when they received cancellation notices from their insurance companies that they were dropping their health plans.

Today, an estimated five million Americans with private health insurance have received cancellation notices since the launch of Obamacare’s online exchanges on Oct. 1, and a new study released Wednesday indicates the problem is only going to get worse – much worse.

The study, released from the American Enterprise Institute (AEI), reports that another 100 million Americans with health insurance through their employers are estimated to lose their coverage in addition to the five million that have already lost their private insurance.

So why are so many Americans losing the health plans that their president promised they could keep?

The answer is because the plans fail to meet the standards set forth by Obamacare – standards that the Obama administration implemented and knew about well in advance of President Obama’s repeated promises that if people liked their coverage, they could keep it, “period”.

When news broke about Americans losing their private insurance, the White House responded with a series of thinly veiled excuses, ranging from an effort to minimize and trivialize the number of people who received cancellation notices, to the president’s attempt to put a spin on his broken promise when he claimed, "What we said was you can keep it (your health insurance plan) if it hasn’t changed since the law passed."

Over a dozen videotaped records prove that is not what President Obama said, and the addition of the word “period” at the end of his promise further supports the intent behind his message was to convince Americans that they could keep their existing health insurance if they liked it, PERIOD.

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Since the rollout of the online marketplaces on Oct. 1, the problem-plagued Obamacare website at HealthCare.gov has been a source of major embarrassment for the administration, starting with what was allegedly just a “glitch” to a Glitch with a Capital G, and then some. But these glitches pale in comparison to the problems created for millions of Americans with cancelled plans that the president promised they could keep.

With the AEI study estimating that another 100 million Americans could lose their employer-sponsored health plans, many experts are predicting a plethora of new problems on the horizon, especially since small businesses will be most affected – meaning that small, entrepreneurial business owners could suddenly be faced with deciding whether to cancel their employees coverage or otherwise pay much higher rates.

While some businesses may opt to cancel coverage, effectively forcing employees’ to sign up for Obamacare, employers also have the option of paying a fixed monthly subsidy for plans the employees purchase on their own.

Up to two-thirds of small businesses in America stand to lose their healthcare plans, based on the AEI’s analysis of estimates by the White House administration – and these cancellations would occur shortly before the congressional elections next year.

In order to circumvent the law, some employers renewed their insurance policies before the end of this year, although AEI’s Scott Gottlieb said that these businesses will still have to provide plans that meet the standards set forth by Obamacare beginning in 2015, while cancellation notices are expected to be sent sometime in October.

Meanwhile, Congress was informed on Tuesday that the Obamacare website at HealthCare.gov may still not be fully functional by the end of November as promised, and Obamacare may also have some additional legal hurdles, including whether or not states can offer those shopping for health insurance on the online marketplaces with voter registration applications.

Nevertheless, the 2010 Patient Protection and Affordable Care Act (a.k.a. Obamacare) includes a provision stating that health insurance policies which fail to offer added benefits (like free preventive care and prescription drug coverage), cannot be sold after this year, even if they’re less expensive.

With the Obamacare website at HealthCare.gov unlikely to be functioning adequately before the end of November as promised, this means that Americans who have had their health insurance plan cancelled could have only a few short weeks to obtain new coverage, which will probably be more expensive.

Reference: American Enterprise Institute (AEI), Health reform: Who is helped? Who is hurt? Where are we headed?, Joseph Antos (November 22, 2013).