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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 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:






Freaky Eazaki came across like the angry little man he is during that interview.  Defensive, rude and disingenuous.  Blame the insurance companies because they complied with the law his  boss and Pelosi cobbled together, that no one read.  Then start the website before it has been properly tested, all this against the better advice of the consultants and programmers that have been over paid to put this together.  Blame the citizens whose policies are being cancelled because they purchased "substandard" policies and lastly, blame the Republicans because they didn't support this catastrophe from the beginning.

Nov 5, 2013 4:22PM

My uncle was cancelled because he needed to have maternity in his plan to be compliant. My uncle is 62 years old.

Nov 5, 2013 5:22PM
Obama has got to go!!!!!! Impeach Obama!!!!
Nov 5, 2013 5:07PM

The current administration will never admit they have mislead the American public. They are masters at deflecting any fault or potential wrong doing,  The insurance companies are just the latest in a long list of scapegoats.  The fact is this law was pushed hastily through while the democrats had a majority to achieve their socialist agenda.  The current long list of problems proves it was never properly vetted for it's impact.  I can only hope the American voter's will learn a lesson here.

Nov 5, 2013 4:34PM
This complete debacle is just the beginning of the Democrat's socialist dystopia. And we are only in the beginning phases of seeing how terrible of a mess Obama, Reid, Pelosi, and their moron minions have created for American citizens. Wait until the taxes kick in for what Obama considers "Cadillac plans" - this is what made the unions so angry because Obama lied to them. The Democrats should have welcomed the Republican's initiatives to delay this a year, instead they opted to shut down the government to score political points.
Nov 5, 2013 4:56PM

The Federal Government is just full of $hit

Obama continues to tap dance his around his "misleading" comments and his minions continue to defend him while they continue to spend tax dollars to institute an Affordable Care Act that isn't affordable and doesn't care if people lose access to their doctor or their current insurance plan....
Nov 5, 2013 5:47PM
The most protected people in the USA is Oblamer,Pelosi and Reid. Do you know why. They have politically destroyed this nation and divided the people to the point where many would want them to disappear now.
Nov 5, 2013 6:06PM

They claim plans are grandfathered, but the rules are written so restrictively that it’s impossible to keep them. In addition to that it’s not cost effective to maintain plans that can’t be sold to new participants.


The administration is being disingenuous.

Nov 5, 2013 5:02PM
I am from a red state. My state didn't expand Medicaid. I hope all of our shysters, derelicts, and parasite democrats move to those socialist blue states so that they can get all of their free stuff from the liberal socialist citizens in those liberal states. Good riddance shysters.
Nov 5, 2013 5:52PM
Can any one of you tell me they have a 'insurance plan' through The ACA??  I doubt it is impossible to sign up for something you can not understand...  A DISASTER of governmental proportions!!!!
Nov 5, 2013 4:27PM
Nov 5, 2013 7:45PM

Lets see - under virtually dictatorial times (2009) the Democrats passed a law requiring all pizza businessess to offer more toppings on their pizzas and for less money (affordable).  Furthermore, they grandfathered all existing pizza recipes so long as nothing changed, but as soon as you change  one mushroom from the recipe you must buy the their gov't recipe forever more.  And if you don't buy the new recipe, then you pay a small voluntary penalty for not buying pizza.  So, they attempted to control our pizza behaviour and pizza spending habits by the authority vested in them AND gave no credibility to the existing pizza places experience and business savvy as to what the public wants and buys.   The Government knows better - right.  That is the ultimate in EGO and Arrogance.


Anybody with any business experience knows how difficult it is to create a profitable business and product to sell.   THERE JUST ISN'T ANY WAY THAT OBAMA KNOWS HOW TO MAKE A BETTER PIZZA THAN PAPA JOHNS MUCH LESS TACKLE HEALTH CARE.  OBAMCARE'S BUSINESS MODEL IS CLEARLY DESIGNED TO FAIL BY ITS OWN INEPT DESIGN.

Nov 5, 2013 4:18PM
" and now for the rest of the story " Paul Harvey
Nov 5, 2013 4:33PM
People are fighting bundle package for cable TV choices in preference for a la carte cable because it can save them money. And here, Obamacare seems to cares/ benefits more for the insurance companies because the new standard coverage.  Now Insurance Companies  have to sell a blanket coverage(bundle package) which cost more.  Wins, Wins for insurance companies because house always win.
Nov 5, 2013 5:22PM
It all started due to the ACA. They either didn't have the foresight to see the consequences of the plan or didn't care. Sharing the blame doesn't ease the pain 
Nov 5, 2013 5:07PM
Im so glad Heaven will not have the majority of these fools.  That's the only comfort i have in the country anymore that there is something better.  All these politicians and Presidents will eventually get theirs..God promises that.   How many of you elites have been able to take your power and billions with you?  Anyone?  Come on?  Has to be one billionaire that got to buy his way into heaven?  Yep, last time i recalled all their power and billions stayed here after their last breath.  

Then Jesus said to his disciples, "Truly I tell you, it is hard for someone who is rich to enter the kingdom of heaven.
Nov 5, 2013 4:33PM

What is this "following the law" thing?......... My administration never presented an example like that.


Signed........ "Dear Leader"

Nov 5, 2013 5:08PM
It grows on people.... but then so do warts
Nov 6, 2013 9:22AM
The Democrats lied to us about ObamaCare. Remember it when you vote!
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