November 11, 2013
Glenn Kessler, the Washington Post fact checker, again took a swipe at the Obama administration over its claim that under the ACA people would be able to keep their insurance if they liked their plan. (He earlier had given Obama the maximum of four Pinocchios over the issue.) The proximate cause is the administration’s efforts to blame insurers for cancelling plans, pointing out that the plans that were in place at the time the ACA was passed would be grandfathered and therefore would not be eliminated due to the requirements of the ACA.
Kessler responds by noting that the vast majority of plans in the individual market are for short periods of time. He presents evidence showing that 48.2 percent of individual plans are in effect less than 6 months and 64.5 percent are in effect less than year. Extrapolating from this evidence on the rate at which individuals leave plans, Kessler calculates that less than 4.8 percent of the people in the individual market have a plan that would be protected by this grandfather provision. Based on this assessment, he awards the Obama administration three Pinocchios for trying to blame the insurers for dropping plans.
While Kessler is undoubtedly correct in noting that few people would be protected by the grandfather provision, there are two important points worth pointing out. First, the vast majority of people hearing President Obama’s pledge would be covered by insurance through their employer. For these people it is absolutely true that the ACA allows them to keep their insurance.
As far as the minority in the individual market, while Kessler is correct that the grandfathering protects relatively few people because policies tend to be short-lived, this data also raises an issue about the pain caused by earlier than expected cancellations. Kessler’s data show that almost half of the plans will be held by people for less than six months and almost two-thirds will be held for less than a year. This means that most of the people being told that their plans are being cancelled probably would have left their plans in the first half of 2014 anyhow. While no one wants to buy insurance more than necessary, it hardly seems like a calamity if someone expected to leave their policy in March and will now have to arrange insurance through the exchange for two months.
Furthermore one has to ask about the role of insurers in this process. Kessler’s data imply that more than three quarters of the people in the individual market signed up for their policies for the first time in the last year. Didn’t insurers tell people at the time they sold the policies that these plans would only be in effect through the end of December because they did not comply with provisions in the ACA? If the insurers did inform their clients at the time they purchased their policies then they would not be surprised to find out now that they will need new insurance. If the insurance companies did not inform clients that their plans would soon be terminated then it seems that the insurers are the main culprits in this story, not the Obama administration.
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