We know now that President Obama wasn’t exactly right when he said that when Obamacare debuts, “If you like your insurance plan you will keep it. No one will be able to take that away from you.” This month many Americans began getting letters from their insurer informing them that plans were being cancelled because they do not meet the minimum coverage standards mandated by the Affordable Care Act. Naturally, these letters shocked many of their recipients, and drew accusations of deception from the right.
A more important question than whether Obama lied is what will really happen to the people getting the letters. Many are worried that they’ll now be forced to pay more for coverage they don’t need. There are three things to unpack here: how many people will lose their current policies, how much they’ll pay for their new plans and whether they need insurance that meets the new minimum requirements at all.
The first question is the simplest to answer. It turns out that only 3 percent of the population may pay higher premiums for new insurance policies. That’s according to numbers that Jonathan Gruber, an economist at MIT who helped to design Romneycare and Obamacare, broke down for Ryan Lizza yesterday.
Source: Justin Wolfers
Here’s how the math works: the “winners” are the 14 percent of people who are currently uninsured and should gain coverage because of the healthcare law. (This figure depends in part on how many states expand Medicaid, and leaves out the 11 million undocumented immigrants excluded from the ACA’s provisions.) For another 80 percent of Americans, who have insurance through their employer or through Medicaid, Medicare or the VA, little will change. That leaves those who purchase their own insurance on the private market, about 6 percent of the population. Gruber estimates that half of those people will be able to purchase new plans so similar to their current policies that the change will amount to “relabeling,” effectively.
We end up with 3 percent compelled to buy significantly different coverage. At this point it’s impossible to say exactly how many will pay higher premiums for those new plans or how significant their rate hikes will be. Many of the people receiving cancellation letters likely chose inexpensive insurance because of financial constraints, and so may be eligible for subsidies.
Still, there will undoubtedly be people who will pay more, and many of them will be mad about it—like David Frum, who says that he will fork over an extra $200 a month for a worse policy, because of the way the law pools risk. “Presumably somewhere there is a DC resident who smokes or who has some pre-existing condition who will receive a corresponding $200 a month windfall,” Frum wrote earlier this week.
That’s how the law works. The outrage over cancelled policies is, at heart, an old song rejecting the suggestion of collective responsibility. Someone receiving a cancellation letter and then facing higher premiums will undoubtedly be unpleasantly surprised, but the fact that 3 percent of Americans may pay more than they do now—so that another 14 percent can be insured—shouldn’t be news to anyone who’s followed healthcare reform. It may not be fair, but neither is charging women higher premiums or locking sick people out of the insurance marketplace. “The ACA was ingeniously designed to deliver benefits to Democratic constituencies and impose costs on Republican ones,” Frum complains. Never mind that red states stand to benefit most from Obamacare, and that there’s no polling I’ve ever seen correlating pre-existing conditions and liberalism. Of course, a better way to ensure that all constituencies receive the same benefits would be a single-payer system.
I can’t evaluate Frum’s charge that his new plan will be worse than his old one, but that’s unlikely to be the case for most people receiving cancellation letters. As Jonathan Chait notes, it’s patronizing to tell people they are only happy with their cheap plans because they don’t know better, but it’s also true. “Even highly educated consumers within this market were frequently snookered by insurance plans that turned out to leave them exposed to surprise costs,” Chait writes. In 2009, 78 percent of Americans who filed for bankruptcy because of medical problems had insurance at the onset of their illness.
Those higher rates don’t only guarantee a minimum range of essential health benefits, limited co-pays and the elimination of lifetime caps. They’re also an assurance that later on, should someone like Frum fall ill, he can still get coverage. That’s what the latest outrage about Obamacare victims misses: the losers and winners aren’t fixed.
Zoë Carpenter on the damaging effects of some states’ refusal to expand Medicaid.