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Why insurers are canceling millions under Obamacare

As the White House tries to fix its health care site, debate rages on about the ramifications of the Affordable Care Act. Do insurance companies bear responsibility for policy cancellations?

By Money Staff Nov 5, 2013 3:22PM

This post comes from Brianna Ehley at partner site The Fiscal Times.

 

The Fiscal Times on MSN MoneySince Obamacare's troubled rollout on Oct. 1, more than 3.5 million Americans have received notices canceling their existing insurance policies next year. The reason -- their  plans do not meet the new standards under the new health care law.

 

For most of these people, the cancellations have come as a shock, since President Obama has continuously assured Americans that if they liked their insurance polices, they could keep them.

 

Despite a wave of accusations that the president's statements were misleading, the White House has staunchly defended Obama's claims and says that insurance companies, not Obamacare, are to blame for the cancellation of millions of insurance plans.  

Over the weekend, criticism of the Obamacare rollout reached a fever pitch, as congressional Democrats joined in the growing chorus of lawmakers calling for the law to be fixed. A group of 16 Senate Democrats -- vulnerable in the 2014 mid-term elections -- is especially nervous about the new law.

 

"The rollout of the new law was a disaster. The administration had three years to prepare," Sen. Jeanne Shaheen (D-NH) told Reuters. "They clearly dropped the ball."

 

Still, the Obama administration and its allies are relentlessly defending Obamacare.

 

Dr. Ezekiel Emanuel, a bioethicist who played a key role in shaping the health reform law, told Chris Wallace on "Fox News Sunday" said that the ACA isn’t responsible for kicking people off their insurance plans.

 

Injured man © image100, Corbis"The law does not say 'Sears, drop coverage!' Sears decides what's good for Sears," Emanuel, the brother of former White House chief of staff Rahm Emanuel, said. "The insurance decides how to make money. When the private companies decide to drop an individual, you blame Obama. He isn’t responsible for that."

 

He pointed to a clause in the ACA that "grandfathers in" plans that don't meet the law's standards but were already purchased before it became law in 2010. Policy experts say that clause is too narrow.

 

Indeed, analysts say between 7 to 12 million people will be kicked off their current plans this year, according to The Washington Post.

 

For some, the change could be a matter of life and death. An essay in Monday's Wall Street Journal by Edie Littlefield Sundby describes how, as a stage-four cancer patient, she is losing not only her insurance policy, but access to the team of doctors who have kept her alive for the past seven years.

 

Canceled policies
The plans under Obamacare's chopping block must have been purchased on or before 2010 on the individual market instead of through an employer or group. If no changes were made by the insurer or the consumer to the plan, the consumer would theoretically be "grandfathered in" and be able to keep her plan.

 

Obama refers to these as "cut-rate plans" offered by "bad-apple insurers."

 

Since changes are made to most plans every year; however, the "grandfather" clause really doesn't apply. This means people who liked purchasing scaled back coverage can't keep their plans. The whole idea of the provision was to make insurance coverage more robust, regardless of what people wanted or could afford.

 

Plans would now include 10 essential benefits, such as emergency services, prescription drugs, maternity coverage, and dental and vision care for children, among others. As The Washington Post’s Sarah Kliff notes, "There's not a whole lot of business sense for a managed care company in maintaining a health plan that doesn’t meet the health law's new requirements."

 

New options
Insurance companies are required by law to notify individuals if their policy will be discontinued under the new law. They are also required to tell consumers about other options they still offer.

 

If individuals don't wish to buy a new plan through their former insurance provider, they have the option to buy insurance through the new online exchange (if they can get glitch-ridden Healthcare.gov to work). However, in order to get a plan that takes effect on Jan 1., consumers are required to enroll in the federal or state exchanges by Dec 15.

 

They can also buy plans outside the new marketplaces, as they have in the past.

 

Under the new law, people who wish to buy scaled back plans are likely to pay higher premiums, since they will be getting more benefits than they would have in the past. Still, some people -- who earn less than 400 percent of the federal poverty line, or $45,000 for an individual -- will  qualify for a tax subsidy to purchase their plan.

 

More from The Fiscal Times:

 

 

 

 

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