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.