— President Obama, speech to the American Medical Association, June 15, 2009 (as the health-care law was being written.)
“And if you like your insurance plan, you will keep it. No one will be able to take that away from you. It hasn’t happened yet. It won’t happen in the future.”
— Obama, remarks in Portland, April 1, 2010, after the health-care law was signed into law.
“FACT: Nothing in #Obamacare forces people out of their health plans. No change is required unless insurance companies change existing plans.”
Many readers have asked us to step back into time and review these statements by the president now that it appears that as many as 2 million people may need to get a new insurance plan as the Affordable Care Act, a.k.a. Obamacare, goes into effect in 2014. As we were considering those requests, one of the president’s most senior advisers then tweeted a statement on the same issue that cried out for fact checking.
The president’s pledge that “if you like your insurance, you will keep it” is one of the most memorable of his presidency. It was also an extraordinarily bold — and possibly foolish — pledge, unless he thought he simply could dictate exactly how the insurance industry must work.
At the time, some observers noted the problems with Obama’s promise.
After Obama made his speech before the AMA, the Associated Press ran a smart analysis — “Promises, Promises: Obama’s Health Plan Guarantee” — that demonstrated how it would be all but impossible for the president to keep that pledge. The article noted that the Congressional Budget Office assumed that 10 million Americans would need to seek new insurance under the Senate version of the bill.
Meanwhile, in the Republican weekly address on Aug. 24, 2009, Rep. Tom Price (R-Ga.), a doctor, made this point: “On the stump, the president regularly tells Americans that ‘if you like your plan, you can keep your plan.’ But if you read the bill, that just isn’t so. For starters, within five years, every health-care plan will have to meet a new federal definition for coverage — one that your current plan might not match, even if you like it.”
One might excuse the president for making an aspirational pledge as the health-care bill was being drafted, but it turns out he kept saying it after the bill was signed into law. By that point, there should have been no question about the potential impact of the law on insurance plans, especially in the individual market.
As we have noted, a key part of the law is forcing insurers to offer an “essential health benefits” package, providing coverage in 10 categories. The list includes: ambulatory patient services; emergency services; hospitalization; maternity and newborn care; mental health and substance use disorder services, including behavioral health treatment; prescription drugs; rehabilitative and habilitative services and devices; laboratory services; preventive and wellness services and chronic disease management; and pediatric services, including oral and vision care.
For some plans, this would be a big change. In 2011, the Department of Health and Human Services noted: “62 percent of enrollees do not have coverage for maternity services; 34 percent of enrollees do not have coverage for substance abuse services; 18 percent of enrollees do not have coverage for mental health services; 9 percent of enrollees do not have coverage for prescription drugs.”
The law did allow “grandfathered” plans — for people who had obtained their insurance before the law was signed on March 23, 2010 — to escape this requirement and some other aspects of the law. But the regulations written by HHS while implementing the law set some tough guidelines, so that if an insurance company makes changes to a plan’s benefits or how much members pay through premiums, co-pays or deductibles, then a person’s plan likely loses that status.
If you dig into the regulations (go to page 34560), you will see that HHS wrote them extremely tight. One provision says that if co-payment increases by more than $5, plus medical cost of inflation, then the plan can no longer be grandfathered. (With last year’s inflation rate of 4 percent, that means the co-pay could not increase by more than $5.20. *Update: Oops, this figure is not correct. See note below.) Another provision says the co-insurance rate could not be increased at all above the level it was on March 23, 2010.
While one might applaud an effort to rid the country of inadequate insurance, the net effect is that over time, the plans would no longer meet the many tests for staying grandfathered. Already, the percentage of people who get coverage from their job via a grandfathered plan has dropped from 56 percent in 2011 to 36 percent in 2013.
In the individual insurance market, few plans were expected to meet the “grandfathered” requirements, which is why many people are now receiving notices that their old plan is terminated and they need to sign up for different coverage. Again, this should be no surprise. As HHS noted in a footnote of a report earlier this year: “We note that, as the Affordable Care Act is implemented, we expect grandfathered coverage to diminish, particularly in the individual market.”
Indeed, at least six states — Virginia, Idaho, Kentucky, Louisiana, Wyoming and Kansas — require insurance companies to cancel existing policies, rather than amend them, if the grandfathered coverage lapses.
Now, it’s important to note that many people — perhaps a large majority — are receiving notices that they have lost their insurance plan because they were never grandfathered in the first place. In other words, they got a plan after the bill was signed into law back in 2010. If that’s the case, they have no option but to accept the more comprehensive insurance mandated by the law.
Still, it’s worth remembering that insurance companies pressed throughout the health-care debate to allow people to keep the policy they had effective at the end of 2013. The consequences of the unusual March 23, 2010, cut-off date are now being felt. HHS, when it drafted the interim rules, estimated that between 40 and 67 percent of policies in the individual market are in effect for less than one year. “These estimates assume that the policies that terminate are replaced by new individual policies, and that these new policies are not, by definition, grandfathered,” the rules noted. (See page 34553.)
Moreover, it’s certainly incorrect to claim, as some Republicans have, that people are losing insurance coverage. Instead, in virtually all cases, it’s being replaced with probably better (and possibly more expensive) insurance.
In recent days, administration officials have argued that the plans that are going away are “substandard” and lacked essential protections — and that many people may qualify for tax credits to mitigate the higher premiums that may result from the new requirements.
“Now folks are transitioning to the new standards of the Affordable Care Act which guarantee you can’t be denied, you won’t be kicked off of a policy because you developed a problem, you may be eligible for tax credits, depending on your income,” said Marilyn Tavenner, administrator of the Centers for Medicare and Medicaid Services. “So these are important protections that are now available through the Affordable Care Act.”
Or, as White House spokesman Jay Carney put it: “It’s correct that substandard plans that don’t provide minimum services that have a lot of fine print that leaves consumers in the lurch, often because of annual caps or lifetime caps or carve-outs for some preexisting conditions, those are no longer allowed — because the Affordable Care Act is built on the premise that health care is not a privilege, it’s a right, and there should be minimum standards for the plans available to Americans across the country.”
But such assertions do not really explain the president’s promise — or Jarrett’s tweet. There may be a certain percentage of people who were happy with their “substandard” plan, presumably because it cost relatively little. And while Jarrett claimed that “nothing” in the law is forcing people out of their plans “unless insurance companies change plans,” she is describing rules written by the president’s aides that were designed to make it difficult for plans to remain grandfathered for very long.
As the HHS footnote mentioned above stated: “We note that, as the Affordable Care Act is implemented, we expect grandfathered coverage to diminish, particularly in the individual market.”
The Pinocchio Test
The administration is defending this pledge with a rather slim reed — that there is nothing in the law that makes insurance companies force people out of plans they were enrolled in before the law passed. That explanation conveniently ignores the regulations written by the administration to implement the law. Moreover, it also ignores the fact that the purpose of the law was to bolster coverage and mandate a robust set of benefits, whether someone wanted to pay for it or not.
The president’s statements were sweeping and unequivocal — and made both before and after the bill became law. The White House now cites technicalities to avoid admitting that he went too far in his repeated pledge, which, after all, is one of the most famous statements of his presidency.
The president’s promise apparently came with a very large caveat: “If you like your health care plan, you’ll be able to keep your health care plan — if we deem it to be adequate.”
Check out our candidate Pinocchio Tracker
*Update: A reader, in a post on the Daily Kos, pointed out that we had incorrectly described the effect of this regulation concerning copays. The medical inflation rate that should be used is not the annual rate, but rather the total since the enactment of the law. Moreover, there is an alternative calculation that allows for even bigger increases for plans that had copays at $18 and above when the law was enacted. So, rather than $5.20, as originally stated in the column, it would be $5.90 for copays below $18, and then progressively higher after that.
Here’s the math on those calculations. The regulations set the base for calculating medical inflation as the overall medical care component of the Consumer Price Index for All Urban Consumers (CPI–U) (unadjusted) published by the Department of Labor. The number for March 2010 is 387.142 and the figure for September 2013 is 457.458. The difference is 70.316. Dividing that by 387.142 yields an inflation rate of 18 percent. (One of the examples in the rule suggests an inflation rate of 22 percent, but that was only illustrative.)
So $5 plus $5 x .18 equals $5.90. But as the reader pointed out, the rule allows for an alternative method, in which the copay is multiplied by the inflation rate plus an additional 15 percentage points. That gets you to 33 percent. The insurer can use whichever number is higher. So here is how it works for various levels of copays:
$0: increase capped at $5.90
$5: increase capped at $5.90
$10: increase capped at $5.90
$15: increase capped at $5.90
$20: increase capped at $6.60
$25: increase capped at $8.25
$30: increase capped at $9.90
We always welcome input from readers, especially if they point out a potential error in fact or logic.