I have already written about this many times (here and here and here and here and here and here and here), but since the misinformation keeps coming from the media, I will keep correcting it. Let’s start with the background on the issue: 5-6% of the population purchases insurance on the individual market (either because they do not work, or because their employers do not offer health insurance). Among this group, approximately half (2.5-3%) are expected to be affected by the MASSIVE WIDESPREAD* policy cancellations that we keep hearing about on the news.
*Please note the use of sarcasm here.
Don’t get me wrong- I think it is awful and don’t want to downplay the effects for the 2.5-3% of the population who may be dropped from their insurance policy. They have a right to be angry- but for the most part, their anger is directed at the wrong source. The misleading stories in the media and the misinformation spread by opponents of the ACA has twisted the reality of the situation into a doomsday scenario sweeping across the nation. Opponents of the ACA and misinformed/maligned members of the media have blamed these policy cancellations on Obamacare. Well, I am here to tell you that this is a complete falsity. In this edition of Mythbusters: Affordable Care Act Edition, I will break down the myths, lies, misinformation, and misunderstandings that are fueling the current blame game and leading to even more confusion and frustration among the American people. Here are the top 6 things you should know:
1. The ACA did not force insurance companies to cancel policies.
On the Nov. 3rd broadcasting of Fox News Sunday, host Chris Wallace wrongly stated that “the Obamacare law demands that the insurance companies change their plans”, resulting in the policy cancellations that have affected some consumers. Yes, policies are being cancelled. No, the ACA did not make that happen. Despite what many opponents of the law are claiming, the ACA did not insist that insurance companies change their coverage options. All insurance companies had the option to grandfather in their old policies that were in place before the law was enacted in 2010 . Unless the insurance company decided to make major changes to the plans (which, again, would be a decision made by the insurer- not by the ACA), they could continue to offer the same plans. Even if those plans did not comply with the ACA’s requirements for essential benefits and pre-existing conditions, insurance companies could still grandfather plans in place before the ACA was enacted in March 2010. The only reason that an insurer would have to change their existing plans is if they decided to make significant changes to coverage after March 2010.
Anyone who has received a cancellation letter should look to their insurance company to explain why they decided to change their plan; after all, the grandfathering policy has been in place since 2010, so insurers have had 3 years to inform their customers if they planned to change or cancel any policies.
I would like to take a moment to recognize the fact that Juan Williams of Fox News is, thus far, the only reporter from the network who has delivered a truthful account about the real reasons why insurance companies are changing and cancelling policies. In a story published on Nov. 5, Mr. Williams writes: “Liar! Pinocchio! Deceiver! With all the charges flying against President Obama in the ongoing effort to stop Obamacare it’s time for a reality check.” He goes on to say, “The fact is if you are one of the estimated 2 million Americans whose health insurance plans may have been cancelled this month, you should not be blaming President Obama or the Affordable Care Act. You should be blaming your insurance company because they have not been providing you with coverage that meets the minimum basic standards for health care. Let me put it more bluntly: your insurance companies have been taking advantage of you and the Affordable Care Act puts in place consumer protection and tells them to stop abusing people. The government did not “force” insurance companies to cancel their own substandard policies. The insurance companies chose to do that rather than do what is right and bring the policies up to code.” We should all applaud Mr. Williams’ efforts to shed light on the reality of the situation, particularly since his colleagues at Fox News are the source of much of the misinformation on this issue.
So let me repeat myself, just in case someone from Fox News or any other media outlet making misleading claims is reading this: all insurance companies were given the option to keep offering their existing plans; if they decided not to, this was a decision made solely by the insurance company.
2. President Obama did not lie about being able to keep your policy under the ACA
Opponents of the ACA have jumped at the chance to call President Obama a liar over his claims that ‘if you like your insurance, you can keep your insurance’ after the implementation of the ACA. In the same broadcast of Fox News Sunday when Chris Wallace misleading stated that the ACA forced insurers to change their plans, he also claimed that the Obama administration “didn’t tell the American people” about the grandfathering policy under the ACA . Similarly, NBC news, USA Today, CNN, CBS News, and the Washington Times, all reported that the Obama administration has known since 2010 that millions of Americans would experience policy changes under the new law while claiming that the administration tried to cover this information up, misleading Americans in the process. The Washington Times article even claims that the White House “acknowledged for the first time” in October that some consumers will need to switch plans.
Apparently the media is having collective amnesia that has erased their memories of the year 2010.
The grandfathering policy has been in place since 2010, and in June 2010 the Dept. of Health and Human Services issued a press release detailing the regulations of the grandfathered policies. In the 2010 report, the Dept. of Health and Human Services specifically acknowledges that “40 to 67 percent” of consumers would likely change policies between 2010-2014, based on average rates of turnover in the individual insurance market. Ironically, Fox News actually reported on the grandfathering policy back in 2010, yet now they are claiming that the Obama administration kept this is a secret. In fact, in 2010, Fox News reported that “the Obama administration’s own estimates say that up to 80% of small businesses and 64% of large businesses may have to give up the plans they have today within three years,” since insurance companies would inevitably change some plans and thus, they would not be grandfathered in. The report from Fox News even includes a clip of Health and Human Services Secretary Kathleen Sebelius making the announcement about the ACA’s grandfathering regulations on June 14, 2010. Not only did Fox News report on this back in 2010, but so did many other national media outlets. In June 2010, the NY Times reported on the ACA’s regulations for grandfathering policies. The article specifically states that the administration “acknowledged that some people….might face significant changes in terms of their coverage.” The article goes on to say, “The law provides a partial exemption for certain health plans in existence on March 23, when Mr. Obama signed the legislation. Under this provision, known as a grandfather clause, plans can lose the exemption if they make significant changes in deductibles, co-payments or benefits” Finally, and most importantly, the article says, “The rules allow employers and insurers to increase benefits. But, in a summary of the rules, the administration said, plans will lose their grandfather status if they choose to make significant changes that reduce benefits or increase costs to consumers.”
As Think Progress reported last month, the potential for policy cancellations and major changes in coverage was covered quite heavily in the media, even leading Congressional Republicans to use the story as fuel for their arguments to repeal the law. In September 2010, The Hill published a story about Senator Mike Enzi (R-Wyo), who pushed for a vote to repeal the grandfathering regulations; the article even includes estimates from the Dept. of Health Human Services, citing that 40-67% of individual policies could lose grandfathered status by 2011. The potential for cancellations was also covered in the NY Post and the LA Times, and Think Progress tracked the story throughout 2010.
So not only did we all know about the regulations for grandfathered policies, but we were also warned, all the way back in 2010, that some insurers would change their policies which would result in significant changes in coverage. No one covered this up, and if you read a newspaper or watched the news between June-November 2010, there is a good chance you saw a story about it.
The most hypocritical and disgraceful element of the Republican’s “outrage” over President Obama’s supposedly misleading claims is that Republicans have been spreading absolutely unfounded, harmful lies about the ACA for two years now… yet there is no outrage over these claims. Republicans and right-wing media outlets have spread so many lies that it is now impossible to keep track of them; yet, they feel it is appropriate to attack President Obama over a claim that is only misleading if you were in a coma during 2010. As Jon Stewart so gracefully and hilariously explained on the Daily Show, “President Obama qualifies his formerly definitive statements regarding the Affordable Act, and his opponents lie like mother**kers about its effects.” And he’s not exaggerating. Rep. George Holding’s (R-NC) claim that Obamacare will add $6 trillion to the deficit? WRONG. Hannity guest Allison Denijs’ claim that her family will pay $20,000 in premiums? WRONG. Fox News host Brian Kilmeade’s claim that Americans face prison time if they fail to pay the fine for not having health insurance? WRONG. Dr. Ben Carson’s claim, on Fox News, that Obamacare is socialized medicine? WRONG. Dr. Ben Carson’s claim, on Fox News, that Obamacare is the worst thing since slavery? I can’t believe that actually happened, but obviously- WRONG! Sarah Palin’s “death panel” claims? WRONG. I could go on here, but you get the point.
3. Insurance Companies have been engaging in bad behavior just like this for years, but now they have a convenient scapegoat for their decisions
As I have written about previously, insurance companies have never looked out for consumers’ best interests. Before the ACA, the individual insurance market was largely unregulated, allowing insurance companies to rip off consumers, cancel policies for no good reason, change coverage and pricing at any time, and refuse to insure people based on conditions as common as pregnancy. They also promoted insurance plans with major problems ranging from huge gaps in coverage to false promises of “discounted” services to fraudulent coverage that magically disappeared when the consumer needed it. Very often, insurance companies offered “swiss cheese policies,” plans that were essentially worthless should a person actually need to use their health insurance. These plans lacked coverage for basic necessities like prescription drugs, hospital stays, post-surgical care, ambulatory care, and maternal health services.
In 2008, Families USA released a report on state consumer protections in the individual health insurance market. In it, they describe the powerless position of consumers in the market, who have “virtually no bargaining power to obtain good health benefits at a reasonable rate,” and are “put at the mercy of insurers and the vagaries of states’ insurance laws.” The report, which surveyed all state insurance departments and compiled information on consumer protection laws, describes what Americans face when they purchase insurance on the individual market. Among other findings, Families USA reports that “protections vary greatly across the country, and in many states, because of a lack of consumer protections, insurance companies can deny people coverage, raise premiums significantly, refuse to cover treatment for certain conditions, and even revoke the coverage of policyholders who have been paying premiums for years.” In 45 states, insurance companies are permitted to deny coverage based on individuals’ health status, occupations, credit history, or even recreational activities. Many insurers deny up to 40% of applicants based on these factors, and only 5 states have guaranteed issue laws that require insurance companies to accept individuals regardless of health status or other factors. In 41 states, even if an insurer accepts an individual’s application for coverage, there are limited or no regulations on how much insurance companies can vary premiums based on health status. In all 50 states, insurance companies are not required to cover pre-existing conditions for at least the first 6 months after purchasing a new policy, and in 8 states and the District of Columbia, insurers can exclude coverage for pre-existing conditions for the duration of the policy. In the majority of states, insurance companies can limit or revoke an individual’s policy long after it was purchased by claiming that the policyholder did not adequately reflect his/her medical history on the application, often leaving consumers with massive medical bills that must be paid out of pocket; in 44 states, insurers can revoke an individual’s policy without advance review by the state. Based on these findings, the report concludes that the lack of standardized regulations and consumer protections on the individual market “leaves consumers to fend for themselves,” and that “without adequate protection, insurers can deny coverage, charge exorbitant premiums, and even revoke people’s policies without warning.”
Insurance companies profit by not paying for consumers’ claims. They are not in the business of paying for health care; in fact, they do everything they can to select policyholders who are least likely to incur medical costs while dropping or refusing coverage for people who need regular or intensive medical care. Paul Krugman wrote an excellent article in the NY Times in 2009, explaining that the individual insurance market is designed to benefit insurance companies – not consumers. In the article, Krugman writes: “Consumer choice is nonsense when it comes to health care. And you can’t just trust insurance companies – they’re not in business for their health, or yours.” He goes on to say that “actually paying for your health care is a loss from an insurers’ point of view – they actually refer to it as ‘medical costs.’ This means both that insurers try to deny as many claims as possible, and that they try to avoid covering people who are actually likely to need care. Both of these strategies use a lot of resources, which is why private insurance has much higher administrative costs than single-payer systems. And since there’s a widespread sense that our fellow citizens should get the care we need — not everyone agrees, but most do — this means that private insurance basically spends a lot of money on socially destructive activities.” Krugman concludes his article by pointing out that there are “no examples of successful health care based on the principles of the free market, for one simple reason: in health care, the free market just doesn’t work. And people who say that the market is the answer are flying in the face of both theory and overwhelming evidence.”
Before the ACA, we regularly heard about the consequences of the poor regulation of the individual insurance market. According to Think Progress: “In August of 2008, Anthem Blue Cross and Blue Shield agreed “to pay a total of $13 million in fines and to offer new health coverage to more than 2,200 Californians the companies dropped after they became ill.” Later that same year, Health Net Inc. reached a settlement with the California Department of Insurance, agreeing “to offer new coverage to 926 customers who were dropped from individual or family policies in the years since 2004.” And in 2010, even after the Affordable Care Act was signed into law, an investigation revealed that WellPoint — the nation’s largest insurer — stretched the nation’s lose anti-rescission laws to cancel health insurance coverage for individuals when they need it most. The insurer used a computer algorithm that automatically targeted “policyholders recently diagnosed with breast cancer” and investigated them for “fraud.” To make matters worse, the company lied to prosecutors about the practice, falsely stating that it had changed its procedures for canceling the policies of patients after they become ill.”
In other words, insurance companies have been profit over consumer needs for years, and policy cancellations are nothing new in the individual insurance market. Over eighty-percent of consumers who have individual insurance plans do not stay on the same policy for more than 2 years, meaning that the estimated 40-67% of people in the individual market affected by policy changes since the ACA was implemented in 2010 is actually less than the normal rate of turnover. And, for those who have received policy cancellation letters, there is a silver lining: at least now, your insurance company can’t drop you if you get sick or hike up your premiums on a whim.
4. The policies being cancelled were a major part of the problem with our health care system, leading to skyrocketing costs for all of us.
Many of the problems with our health care system that created the need for health reform were a direct result of insurers’ bad business practices. The problems I discussed above led to major consequences for individual consumers, as well as the market as a whole. Most of the policies in question left policyholders underinsured, meaning that important medical services were not covered by their current plan. The financial consequences of being underinsured are devastating, and they impact everyone- including you. Here’s how:
Financial stress and major financial problems due to medical bills are common among the underinsured, with half of underinsured individuals reporting that they have been contacted by a collection agency for medical bills and more than one-third (35%) reporting that they had to make major changes in their way of life to pay medical bills. Medical bills are the number one cause of bankruptcy in our country, and 3 out 4 people who declared bankruptcy because of medical bills had health insurance.
When medical bills go unpaid, the costs don’t just disappear. They are absorbed by the government, and by insurance companies. And guess who pays for that? You, me, and every other taxpayer and insurance customer in the country. Unpaid medical bills were one of the primary reasons for the out-of-control health care costs in the U.S. According to an analysis by Families USA, we all pay an average of $922 annually in health insurance costs and taxes just to subsidize unpaid medical bills. Yes, that’s right: when someone buys a bare-bones policy or does not have insurance at all, we all end up paying almost a thousand dollars more per year for our own policies and taxes just to pay for others’ unpaid bills. That amount doesn’t even include the increased costs of health care that we pay to subsidize unpaid costs at hospitals, doctor’s offices, and other providers of health services, which totals approximately $34 billion per year.
And when insurance companies get into trouble for their fraudulent practices- guess who pays for that? If you guessed taxpayers, you would be right. For example, in February 2013, insurance company ‘Chartered Health Plan’ was in trouble with insurance regulators and the IRS; deciding that the best option was to sell the company, executives at Chartered Health Plan bowed out and left taxpayers with $45 million in unpaid medical claims.
In other words, most of the people who are saving money by purchasing bad policies with huge gaps in coverage are dumping their unpaid costs on everyone else. That makes the story sound a little different, doesn’t it?
5. Most of the media’s ‘Obamacare Horror Stories’ have turned out to be misleading – at best.
A recent op-ed in the Wall Street Journal features the story of Edie Littlefield Sundby, a stage-4 gallbladder cancer survivor who is unable to keep her current health insurance plan. In the story, Sundby blames the ACA for the change in her coverage, stating, “Thanks to the law, I have been forced to give up a world-class health plan. The exchange would force me to give up a world-class physician.” As it turns out, Ms. Sundby’s insurer, United Healthcare, is pulling out of the individual health care market because they have been struggling to keep up in California’s individual market for years and don’t want to pay for sicker patients like Ms. Sundby. The CEO of United Healthcare explained their decision to pull out of the individual market: “The company’s plans reflect its concern that the first wave of newly insured customers under the law may be the costliest,” UHC Chief Executive Officer Stephen Helmsley told investors last October. “UnitedHealth will watch and see how the exchanges evolve and expects the first enrollees will have ‘a pent-up appetite’ for medical care. We are approaching them with some degree of caution because of that.” Read that statement again. Even their CEO admitted that they are dropping policyholders from their coverage because they want their competitors in the market to take on the sicker consumers, and then they plan to re-enter the market so they can make money from the healthy consumers who have not yet signed up for a plan. Obviously, this decision had nothing to do with the ACA. This was a business decision based on United Healthcare’s belief that dropping their current policyholders would lead to greater profit in the end.
There are many other examples of “Obamacare Horror Stories” that have already been debunked. I have covered many of these (here and here and here and here and here), as have many others (here and here and here and here and here and here and here and here). None of these stories have been reported truthfully. The reporters covering the stories have gone along with the myth the ACA is the reason that insurance companies decided to cancel policies, and many have failed to do even basic research into the veracity of the individual account. In several instances, the individual affected has claimed that they will now be paying significantly more for their coverage, but when a conscientious reporter did a bit of searching on the Marketplace they were able to easily find them a better plan for less money than the person was paying for their old policy. All in all, almost all of these stories have turned out to be misleading at best, and completely untrue at worst (such as Hannity’s “Obamacare Victims”, which turned out to be a completely fabricated story). It’s not that the consumers are lying; they are simply misinformed or misled by the media. The responsibility falls on our politicians and reporters who knowingly make misleading statements and leave out key facts when reporting on these stories. It seems that we no longer have accountability in politics or journalism, leaving the door wide open for the untruthful behavior we have seen in recent months.
6. The problem is not nearly as “widespread” as some have reported. The number of people who will have to switch policies is a fraction of the number who will gain access to affordable coverage.
In an October 31st article, the Wall Street Journal reported on the “widespread health-plan cancellations.” I guess they have their own definition of widespread, because generally something that affects less than 3% of the population is not classified as “widespread.” Even more to the point, the number of uninsured and underinsured Americans who will now have access to insurance is over four times the number of people who will have to switch policies. The benefits of the ACA for these 84 million uninsured and underinsured Americans far outweigh the inconvenience of those having to switch policies. For many people, the ACA is the first opportunity they will ever have to get health insurance, while for others, it allows them to afford insurance despite having a pre-existing condition.
The Kaiser Foundation reported on the millions of consumers who were previously denied coverage because of health problems who will not be eligible for insurance through the ACA’s Insurance Marketplace. In their report, they interviewed several individuals who, before the ACA was implemented, were unable to obtain coverage because of pre-existing conditions. Debbie Bashman, a 62 year-old Louisville resident, beat breast cancer 17 years ago but has not been able to find coverage since then. “I am looking forward to having a choice of plans and paying significantly less for better coverage,” she said. “This really is an end to the misery [so] that we can … do the things we haven’t been able to because of high insurance premiums, like taking a vacation and going out to eat.” Basham, who works at a golf course that does not offer health benefits and who runs a non-profit agency for people with breast cancer, gets angry when politicians talk about repealing the health law. “I get so irate because these politicians have no feeling for the common person who is working, and they could care less if people live or die,” she said. Stacey Kravitz, 45, of Coral Springs, Fla., said she has been turned down for insurance because of a minor heart valve problem and a food allergy that causes diarrhea. But she said neither condition requires her to see a doctor more than the average person. For the past year, she’s been covered by the health law’s Pre-existing Condition Insurance Plan, which ends in December. Kravitz, a gemologist, said she is thrilled to be able to choose from among different private health plans beginning Tuesday which are barred from asking her about her health status. “For me the important thing is to have access,” she said, “to know if I have to go the emergency room, I won’t be a drain on my fellow citizens.”
The Bottom Line
The stories told by politicians and reported in the media are far from the truth, and by blaming the ACA for individuals’ canceled policies, they are essentially letting insurance companies off the hook for their bad behavior. Considering that the insurance companies were a major cause of the problems with our health care system, it makes absolutely no sense to absolve them of all responsibility while pointing the finger at the reform that we so desperately need.
So the next time you hear an “Obamacare Horror Story,” remember these things: The ACA didn’t make insurers change their policies, we were all given information several years ago about the potential for policy changes and cancellations, and most of the canceled policies were creating major problems for everyone. In this case, what the media doesn’t tell you can cost you – literally. About a thousand dollars a year.
Be Well, my friends.