Democrats scramble to cancel insurance cancellations

One of the arguments made for the 2010 healthcare law was that it attacked the problem of underinsurance -- the threadbare policies that offered such poor coverage, they allowed millions of Americans to be bankrupted by medical bills. Now, however, Democrats are confronting the fact that the law they wrote is forcing thousands of people to lose their current insurance plans because the coverage doesn’t meet the new standards. It’s a perfect example of the road to political hell being paved by good intentions.

Not surprisingly, at least one politically vulnerable Democrat is readying a proposal to roll back the 2010 law to let people keep policies that don’t meet the standards it sets. Sen. Mary Landrieu (D-Red State With Elections Next Year) hadn’t released details of her proposal as of this writing, but was expected to do so soon.

At the root of the problem is the conflict between President Obama’s oft-repeated promise that “if you like your healthcare plan, you’ll be able to keep it” and new rules designed to guard against insufficient insurance coverage. Included in the latter are a prohibition on policies that cap total reimbursements paid for medical bills (on either an annual or lifetime basis) and a requirement that policies limit deductibles and co-pays while covering at least 60% of the cost of delivering 10 “essential” health benefits.

Those requirements, which go into full effect Jan. 1, don’t apply to plans that people first obtained before the law’s enactment and have been renewing ever since. Nevertheless, hundreds of thousands of people across the country have received notices from their insurers in recent weeks telling them that their current plans are being discontinued because they don’t comply with the Affordable Care Act.

Republicans and their allies have made the most of the cancellations, saying Obama’s pledge was a lie. Landrieu responded to that accusation indirectly on Wednesday, telling Politico, “The promise was made, and it should be kept.... And it was our understanding when we voted for that bill that people when they have insurance could keep with what they had. So I’m going to be working on that fix.”

But really, no one familiar with the law can say that they didn’t see this coming. After all, the Affordable Care Act took deliberate aim at health plans that Democrats considered insufficient -- and not just in the market for individual policies. So-called mini-med plans offered by some employers ran into trouble shortly after the law’s enactment because of the annual caps they place on reimbursements, prompting numerous employers (mainly in low-wage industries; one notable example was McDonald’s) to threaten to drop coverage. The administration granted waivers to hundreds of these plans, but those expire at the end of the year.

The ACA also allows catastrophic-only coverage in the individual market to be offered only to those up to age 30. Such lower-cost policies have grown in popularity as premiums have risen. Now, however, anyone over 30 who signed up after March 2010 for a catastrophic-only plan will have to find a new, and probably more expensive, plan for 2014.

The prohibition stemmed from the fear that too many younger, healthier people would sign up for such plans, denying insurers the dollars needed to pay the costs imposed by sicker customers. But the flip side of the coin is worse: If the same people decide to go uninsured (and pay the comparatively small tax penalty) rather than obtain the more comprehensive coverage the law requires, they’ll leave insurers with even less money and a higher concentration of sicker, riskier customers, potentially triggering a vicious cycle of premium increases and dropped coverage.

Ideally, Congress would have phased in the insurance reforms over a longer period to stagger the cancellations and reduce the sticker shock that many (but not all) of those shopping for individual policies are experiencing. Or it would have responded sooner to the signals it was getting from companies such as McDonald’s. It’s not clear what it could do now, though, besides simply giving non-compliant plans a waiver so that insurers can continue to offer them for at least another year.

To date, both sides in the polarized debate over Obamacare have been less interested in fixing its problems than in the larger battle over killing or keeping it. So it will be interesting to see if Republicans would support a proposal that would simply give the terminated plans a new lease on life, as opposed to a broader step that would do more to undermine the 2010 law -- for example, by delaying the individual mandate to buy insurance.

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