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Insurance Cancellations: The Price Of Mending A Broken System?

Posted: November 5, 2013

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As Heard On Morning Edition

The cancellations are making some people angry and many anxious. Opponents of the health law feel vindicated. They all cite the conflict between the cancellation notices and President Obama's repeated promise that people who like their existing health coverage could keep it.

Lisa Dieckman, a retired psychologist in Los Angeles, likes the Affordable Care Act's promise that everybody can get health insurance. But she's not happy about being told she can't keep her own coverage and will have to pay considerably more for a policy she doesn't consider any better.

Doug Normington, who runs his own video production company in Madison, Wis., is also among those who recently got a cancellation letter from his health insurer. He's frustrated he can't find out about his options on the government's HealthCare.gov website. But he's glad he won't have to search high and low for an insurer that will cover him despite his diabetes — and welcomes the federal subsidy he expects to help pay the premium.

Statistics aren't available yet, but Dieckman and Normington may be among millions of Americans whose health insurance is being canceled because their policies don't meet the requirements of the Affordable Care Act.

The cancellations are making some people angry, many anxious and opponents of the law feeling righteous. They cite President Obama's repeated promise that people who like their current coverage could keep it.

In fact, though, the type of health insurance being canceled — nongroup policies that individuals buy on their own rather than through their employer — has always been subject to abrupt cancellation, sudden jumps in price and seemingly capricious restrictions on coverage.

"The market for individual coverage has always been the most expensive, the most volatile, the least secure part of health insurance in the United States," says John McDonough of the Harvard School of Public Health.

McDonough, an architect of the Massachusetts legislation on which the Affordable Care Act is based, acknowledges that the federal law's effect on buyers of individual coverage is a mixed bag, but he claims by far the most of them will be better off.

"Some of those folks will find they're going to get much more affordable options," he says. "And some of them — depending upon their age, their geography and other factors — will find that it will cost them more."

It's all about fixing what McDonough calls "the most dysfunctional part of the health insurance system."

Around 15 million Americans — about 5 percent of the nation's population — buy health insurance on the individual market. They're self-employed, like Normington, retired from jobs that once provided group coverage, like Dieckman, or married to spouses whose employers don't provide family coverage, like Meg Lanfear, a violinist and self-employed music teacher in Oak Park, Ill.

She and her husband delayed having their first child for two years because the small firm he works for doesn't provide coverage for spouses. And she couldn't find any insurer in Illinois willing to cover her because she had been successfully treated for cervical cancer.

She had to be cancer-free for three years, one insurer said. "I basically waited until Blue Cross would insure me," Lanfear says. "We just delayed our plans."

Lanfear's hard-won coverage just got canceled, too. But she's happy she'll be able to get new insurance to cover the birth of her hoped-for second child. And under the new law, maternity care will be standard.

"I don't know if I can wrap my mind around it being a standard [feature], it's been such an issue and ordeal," Lanfear says. "But my feeling is that if the risk is spread across many people, whether it's cancer care or maternity coverage, I think we all come out ahead in the end, whether we end up using that part of our insurance or not."

That, in fact, is one of the major reforms of the individual insurance market, McDonough says. Insurers will no longer be able to reject consumers who already have a medical condition.

As of next year, individual insurance policies will also come with some guaranteed benefits, such as preventive and mental health care. There will be caps on out-of-pocket costs, a ban on lifetime limits and a curb on age- or gender-related discrimination in premiums. There will also be fairly generous subsidies for consumers with incomes up to four times the federal poverty level — nearly $46,000 for individuals, $94,200 for a family of four.

Dieckman, the Los Angeles retiree, says she's almost embarrassed about accepting the monthly premium subsidy of $192 that she expects under the Affordable Care Act. She has an income of around $43,000 a year, owns a mortgage-free home and has some savings. "I wrote to Obama saying I feel silly taking a subsidy," she tells Shots. "On the other hand, I'm also not crazy about the fact that I'll be paying so much more."

Dieckman's insurer, Kaiser Permanente, has told her that her premium for a policy that complies with the new federal law will rise from $219 to $498 per month. The subsidy will bring her cost down to around $300.

One way to think about the subsidies for individual coverage is that they're not welfare, they're a correction for an age-old inequity in U.S. health insurance. McDonough, the Harvard policy specialist, notes that people who get coverage through their workplace have always gotten generous government subsidies through the federal tax code. Those who buy coverage on their own have not.

Copyright 2014 NPR. To see more, visit http://www.npr.org/.

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