Richard, in the context of Obama’s no-weasely-words statement, I think it has to be said that the grandfather provision does not do what he said it did. Whether or not that’s a reasonable expectation is another matter; the issue here is simply whether Obama’s words were accurate, and they weren’t.
Sounds plausible. Would be interesting to see if we can find something from the industry explaining this.
And I’m not sure I disagree. Though I think it is pretty relevant that often right next to that statement he clearly explained that ALL policies would have to change to meet some of the new requirements.
I’m more interested in correcting the details about precisely what does in fact cause a policy to lose grandfather status, what requirements are imposed on those policies, and the actual economic implications of those impositions. That to me is the more interesting public policy question than parsing a phrase from Obama’s speeches.
So I’ll post the full list of requirements in a few minutes.
Here’s the complete list of requirements imposed on grandfathered plans:
[ul]
[li]No lifetime limits (but can still impose annual limits)[/li][li]Limitation on non-fraud rescissions[/li][li]Extension of dependent coverage to age 26 (but only if it already covered kids)[/li][li]Uniform coverage descriptions[/li][li]Premium rebates for percentage of premiums not used on medical costs[/li][/ul]
*See *45 CFR 147.140(d)
ETA: Oops. Also, some group plans cannot exclude kids for pre-existing conditions.
Broadly speaking, the individual market is a huge cash cow for health insurers. Remember, with group policies the insurer knows the age ranges of the pool, the number of non-employees to be covered, and just about nothing else. In the individual market, the insurer knows the policyholder’s height, weight, immunization history, risk factors for heart disease, zip code, marital status… That makes it a lot easier to underwrite (at a rate that will return a profit, that is).
That makes sense but the grandfathered plans are restricted in ways I described above without the ability to add new people to the particular plan. So premiums would necessarily skyrocket over time
I have to agree. I find the idea that something is said to be “grandfathered” only if it meets some new requirements to be a misuse of that that term.
Keep in mind that they can also increase almost all the other variables, just subject to certain limits.
Take fixed co-payments (i.e, $30 co-pay). They can increase it by the greater of: (1) $5 times medical inflation; or (2) medical inflation plus 15 percentage points.
That’s actually a pretty big margin to be able to increase. The deductible can similarly be increased by 20% or so (and more each year with medical inflation) without losing grandfather status.
Maybe that’s still not enough, but I think it’s not entirely clear that the economics dictates cancelling the plans. (Though, again, I agree that if people understood Obama to be saying that the ACA didn’t affect at all existing plans, then this would clearly violate that pledge.)
I don’t think that’s correct. It looks like the greater of $5 increased by medical inflation (not quite sure if that means adjusted for inflation) or medical inflation plus 15%. Also the deductible can be increased by medical inflation +15%.
The point is that individuals on that plan will cost more over time (by definition…unless they die) as they get older and sicker. I’m not convinced that the allowable increases are enough to make a plan worthwhile to an insurance company. Remember, you don’t need to make a plan illegal, just make it as difficult as possible to make a profit and the results will be the same. I think that’s what we are seeing here.
Where did I say otherwise? The 20% is 15%+5% (roughly the current rate of MI).
The problem of the individual insured getting older and sicker would be true with or without the ACA. Presumably the response to it in the past has been premium increases, co-payment increases, annual limits, and eventually nonrenewal. That same set of responses still exists under the ACA.
One possible cause of throwing off the economics could be the premium rebate requirement. Do we know if the costs of underwriting the policies counts toward qualified costs in that formula? RNATB?
You said $5 times medical inflation. I think that’s incorrect.
The inability to add new customers to the particular grandfathered individual plan is what will cause prices to increase more over time.
Oh, I see. If medical inflation is 5%, I did not mean $5 x .05. I meant $5 adjusted for medical inflation (i.e., $5 + 5(.05)). I thought that was clear by context. 
There’s no such thing as adding new customers to an individual plan (except family members, who can indeed be added). What you mean is selling more individual policies. But they aren’t sold identically–they are separately underwritten for each individual, as **RNATB **explained. So it is not at all clear that your risk pool analysis applies to that market.
Now, I assume that the underwriting isn’t *completely *individualized, such that selling more of the plan will indeed reduce the average payout per policy. But the connection there is no greater than the connection between any premiums paid to an insurance company and other policies it issues. If you canceled their auto insurance business it would also decrease average payouts across auto and health policies.
I may be wrong but I don’t think that each individual policy is treated as a separate entity. Yes, in states where it is allowed there is underwriting for each policy holder. But most individual policies are “guaranteed renewable” and reunderwriting is limited. So, over time, the insurance company cannot be as sure of the health of the individual as they would be with unlimited reunderwriting.
Each type of individual policy is a product for the insurance company. I assume that all individual plans lumped together for a particular policy would need to collectively be profitable for the company. If this is the case then my comment stands. If I’m incorrect here then your point is valid.
Another data point to the discussion.
Everyone has stories about how someone they know got sick and their insurance was cancelled. Before ACA, could insurers do that? If so, does the fact that they can’t weasel out of paying enter into the discussion at all?
Another thought. We are all pretty intelligent and I’ve got to say this I’d one of the least partisan discussion on Obamacare I’ve seen. Is it safe to say that given what Obama, HHS and insurers are saying about keeping insurance, exchanges being cheaper and conditions for grandfathering policies that:
- No one really knew what was going to happen when ACA went into effect.
- The average American doesn’t really know how all of these variables are affecting each other.
- Obama was wrong when he said you could keep your policy. Insurers are wrong when the say they have to cancel your policy due to ACA. Instead the real answer is somewhere in the middle.
It isn’t clear to me. I’ll be curious to learn more.
Another factor that matters in that analysis:
Something like 95% of individual market policies are not kept for more than 5 years. I would guess that the insurance company models of what happens to the premiums for these policies without the influx of new applicants doesn’t even extend out more than a decade or so, because almost no one keeps individual market policies for that long.
Prior to the ACA, a policy could be rescinded for omissions and misrepresentations in the application. For example, an application might have asked whether, in addition to the enumerated questions, there were any other health issues the person had in the past. If they failed to list a visit to a psychiatrist ten years ago, they could have the policy rescinded after they got breast cancer–even though they did not intentionally mislead the insurer and even though the psychiatrist had nothing to do with breast cancer.
Now, they can only be rescinded for intentional fraud, basically. I’m sure that does cost the insurers some money.
On your general point, I agree that it is enormously complicated, and it is very likely that some of the reason for cancellations is changes made by the ACA and some of the reason is insurers using the ACA as an excuse. From my analysis, I think it is actually the statute, and not the regulations, however, that is influencing cancellations.
I think that you are basically right, but a definition is in order for “your policy” (the general you). It’s almost like the Ship of Odysseus problem to determine when you’ve kept “your policy.”
If the premium goes up, benefits are added, and other changes are made because of the ACA, is it still “your policy” simply because there hasn’t been a name change or a cancellation?
Conversely, is it somehow NOT “your policy” because it was cancelled and then replaced with something similar to the changes discussed in the last paragraph? Does a health care insurance policy have a soul that can be deemed integral to the plan itself? 
I joke about that last one, but I think that any reasonable construction of “you can keep your policy” implies that no new regulations will be added that might disturb your continued enjoyment of your policy. Otherwise, if “your policy” has to comply with the regulations applicable to new policies, then what is the functional difference? What is the practical meaning of keeping “your policy”?
For example:
A=Pre ACA policy, non compliant
B= new requirements of ACA
C=ACA compliant policy
Saying that you can keep A so long as you have B, is no different than saying C. Whether your current insurer makes you pay a higher premium and adds B, or cancels your policy and reissues policy C makes no practical difference and any statement about keeping your own policy is meaningless no matter what your insurance company does
Yes, but if people are keeping these policies it would be to avoid the newer, more expensive policies. Under those circumstances a lot more people may have kept their plan for longer periods of time.
If you were interpreting “keep your policy” in the context of the rest of his speeches, you should have known it meant keep your policy as modified by the few fundamental consumer protections built into the law. There’s no other way to interpret several of his key speeches. It has to comply with five or six out of the *dozens *of new requirements–specifically, the five or six that Obama had said all along would apply to all insurance. It is grandfathered for the rest.
And keep in mind that the context of the line–often explicitly–was as a rebuttal to claims that the government would be choosing your doctor, that you would have to sign up for a new government plan, etc. “Keep your policy” was meant to contrast to government takeover of healthcare.
So it really is not as clear-cut as all that.
The 95% turnover is because most people go onto group policies, which are virtually always cheaper than pre-ACA individual market policies.
There is some subset of those people who, absent the ACA, would have transitioned into a different individual market policy that would have been cheaper pre-ACA. I’m not sure whether there are enough such people to matter for the bottom line of the profit margins of the grandfathered policies.
None of that diversionary “context” crap now, Richard. This thread is solely about proving “Obama lied! We win!”, or so we’ve often been told.