Govt Agencies Knew Americans Wouldn't Keep Health Plans

The case of what the Administration knew about Americans losing their health insurance is a story of how the Administration doesn’t know what its own agencies are doing to enact regulations to enforce major laws like health reform, including the analysis these agencies have in hand to create rules and regulations.

For example, the IRS, Health & Human Services, Treasury and Labor had concluded in and around 2010 that under the new health-reform law, “because all newly purchased individual policies are not grandfathered, the departments expect that a large proportion of individual policies will not be grandfathered, covering up to and perhaps exceeding 10 million individuals”.

Starting in the summer of 2009 and through 2012, President Barack Obama made variations of this vow: "We will keep this promise to the American people. If you like your health-care plan, you will be able to keep your health-care plan. Period.”

But ever since health reform was enacted, hundreds of thousands of people have been losing their plans because they don't comply with the new law, according to Kaiser Health News.

And now the Administration is fighting back against claims that it knew since at least 2010 certain insurance policies would not be accepted under health reform due to the law’s basic, minimum standards for coverage.

The question now is one of cause and effect of the health-reform law.

In a thunderous bit of hairsplitting heard from coast to coast, in effect the Administration is now blaming the insurance industry, not the law.

White House officials have taken to their social media accounts to blast NBC News reports to argue the law itself is not forcing consumers off insurance plans, it’s the insurers, stupid, who are doing that because they are changing their policy co-pays, deductibles, premium expenses, what costs get covered, etcetera, which means the plans then lose their grandfathered status.

“NBC ‘scoop’ cites ‘normal turnover in the indiv insurance market’. That’s a) not new b) not caused by #ACA c) the problem #ACA will solve,” White House principal deputy press secretary Josh Earnest  tweeted.

On Twitter, White House advisor Dan Pfeiffer called the reports “misleading.”

White House advisor Valerie Jarrett wrote. “FACT: Nothing in #Obamacare forces people out of their health plans. No change is required unless insurance companies change existing plans.”

Kaiser Health reports that “Florida Blue, for example, is terminating about 300,000 policies, about 80 percent of its individual policies in the state. Kaiser Permanente in California has sent notices to 160,000 people – about half of its individual business in the state. Insurer Highmark in Pittsburgh is dropping about 20 percent of its individual market customers, while Independence Blue Cross, the major insurer in Philadelphia, is dropping about 45 percent.”

Health & Human Services, the Internal Revenue Service, the U.S. Treasury and the Labor Dept. had studies and analysis in hand around 2010 when the health law was enacted that showed millions of Americans could lose their health plans, despite the president’s protestations to the contrary.

The president signed health reform into law on March 23, 2010. The law said that policies as of that date will be “grandfathered,” meaning consumers can keep their policies even if they don’t meet the new law's standards for things such as preventive health care and cost-sharing, like deductibles. Any plans after that date that don’t meet the new standards won’t be grandfathered.

But a law doesn’t just go flying across the transom into the system. A law needs regulations to enforce it, which come after reading studies and conducting market analysis. And that’s where the various federal departments and agencies came in.

The U.S. government issued regulations in the Federal Register in the summer of 2010 that said that if any part of a policy was significantly altered since health reform was enacted -- like  changed deductibles or co-pays -- the policy would not be grandfathered, which meant that consumers could then lose their plans.

In regulations issued in the Federal Register for the new health law on June 17, 2010, there is an estimate that says “the percentage of individual market policies losing grandfather status in a given year exceeds the 40% to 67% range.”

You can read the regulations here.

You’ll see the issue these agencies were struggling with was trying to figure out how many plans might not get grandfathered, given that many people lose their plans in any given year, causing benefit changes.

The Federal Register states that “a variety of studies indicate that between 40% and 67% of policies are in effect for less than one year.”

It then said the Treasury, Labor, and IRS therefore estimate “the number of individual policies that would terminate, and therefore relinquish their grandfather status, is 40% to 67%” under the new law. 

The footnotes for this data cited a much earlier study from May 2008, posted by the Robert Wood Johnson Foundation, by health researcher Adele M. Kirk that discussed how often consumers change their insurance plans (“The Individual Insurance Market: A Building Block for Health Care Reform? Health Care Financing Organization Research Synthesis. May 2008, http://www.hcfo.org/pdf/synthesis0508.pdf).

“High turnover rates.. dominate benefit changes as the chief source of changes in grandfather status,” said the Federal Register.

So given that a high number of consumers lose or get rid of their plans in any given year, the Federal Register also said that “these estimates assume that the policies that terminate are replaced by new individual policies, and that these new policies are not, by definition, grandfathered.”

It went on: “In addition, the coverage that some individuals maintain for long periods might lose its grandfather status because the cost- sharing parameters in policies change by more than the limits specified in these interim final regulations.” That means changes to co-pays or deductibles kick out plans from under the health-reform law.

The Federal Register notes that the IRS, the Treasury, Labor and HHS departments “estimate that the percentage of individual market policies losing grandfather status in a given year exceeds the 40 percent to 67 percent range that is estimated based on the fraction of individual policies that turn over from one year to the next.”

Five months after health reform was enacted, the Internal Revenue Service put out a bulletin noting these estimates of policies potentially losing grandfathered status (link here: http://www.irs.gov/irb/2010-35_IRB/ar06.html).

The IRS bulletin described how, since the law’s enactment, Health and Human Services, the U.S. Treasury, and the Labor Dept. got busy with codifying new regulations and rules that “apply to group health plans and health insurance issuers in the group and individual markets.”

The IRS then said: “The Departments estimated that there are approximately 72,000 large and 2.8 million small ERISA-covered group health plans with an estimated 97.0 million participants in large group plans and 40.9 million participants in small group plans.” They also figured there were another “126,000 governmental plans with 36.1 million participants in large plans and 2.3 million participants in small plans” and “16.7 million individuals under age 65 covered by individual health insurance policies.”

But then the IRS in oddly worded language said these government regulators decided “plans can choose to relinquish their grandfather status in order to make certain otherwise permissible changes to their plans.”

The IRS notes that the government regulators estimate that “18% of large employer plans and 30% of small employer plans would relinquish grandfather status in 2011, increasing over time to 45% and 66%, respectively, by 2013, although there is substantial uncertainty surrounding these estimates.”

The IRS then noted the Departments estimate that in 2011, “approximately 98 million individuals will be enrolled in grandfathered group health plans in 2013, many of which already cover preventive services.”

And then the IRS also noted that “in the individual market, one study estimated that 40 percent to 67 percent of individual policies terminate each year."

The IRS also said: “Because all newly purchased individual policies are not grandfathered, the Departments expect that a large proportion of individual policies will not be grandfathered, covering up to and perhaps exceeding 10 million individuals.”