Report: Canceled Health Plans Should Be Kept in Perspective

Critics of the Affordable Care Act have lambasted President Obama's signature legislation as it struggles with technical glitches and as thousands of people nationally report the cancellation of their existing health insurance plans. But a report released Thursday by Families USA, a national health consumer organization, attempts to put the numbers in perspective.

“Although President Obama was right to express his concern about and to propose interim corrective action for the people at risk of losing health coverage due to the Affordable Care Act,” said Ron Pollack, executive director of Families USA, “it is important to keep a perspective about the small portion of the population that may be adversely affected.”

The Affordable Care Act, also known as Obamacare, requires most people to carry health insurance in 2014 or pay a tax penalty. Texas political leaders strongly oppose the law, and lawmakers chose not to create a state-run health insurance marketplace to offer health plans and tax subsidies or to expand Medicaid, the state-federal program that offers health coverage to poor children and people with disabilities. Instead, Texans seeking coverage must use the federal health insurance marketplace, healthcare.gov, which has been plagued with technical problems that have obstructed people from finding out whether they qualify for tax subsidies and from purchasing health plans.

Meanwhile, health insurers have also been forced to terminate millions of health plans that don't comply with the law. More than 113,000 Texans who don't qualify for tax subsidies to purchase a new plan have received notices that their health plans will be canceled as a result of the Affordable Care Act, according to the Families USA report. The ACA set new standards for health insurance policies offered in 2014: They must cover essential health benefits, and health insurers cannot deny coverage for people with pre-existing conditions, charge discriminatory premiums based on health status or gender, or set annual or lifetime caps on payouts. Obama has pushed to change federal rules to allow insurance carriers to renew customers' existing policies, even if they don't meet the new regulations, but many fear it may be too late to keep Texans from losing health coverage. 

“The Obama administration knew that millions of Americans would lose the health care plan they had — and liked — but chose to misrepresent the law," John Davidson, a health policy analyst at the conservative Texas Public Policy Foundation, said in a statement. "It is disingenuous for those responsible for this harmful legislation to claim that a quick administrative fix is now needed. What is needed is an entirely new approach."

But Pollack argued that it’s important to keep the number of people who will lose coverage under the law in perspective. Millions of uninsured Americans will gain coverage in states that chose to expand Medicaid, millions whose coverage is terminated will qualify for tax subsidies to purchase more expansive coverage, and those with pre-existing conditions will no longer be denied coverage, he said.

Of the 267 million people in the U.S. who are under 65 years of age, 15.2 million people — 5.7 percent of the non-elderly population — have private coverage purchased in the individual market, according the Families USA report. More than 10.8 million of those people who have individual health coverage are in households with incomes that are less than 400 percent of the federal poverty level — $46,000 annually for an individual, or $94,200 annually for a family of four — and they would qualify for tax subsidies in the federal marketplace or for expanded Medicaid coverage, according to the report.

Texas has the highest rate of uninsured residents, about a quarter of the state's population. Among the non-elderly, 4.2 percent of people — 953,000 of 22.7 million people under 65 — have health care coverage purchased in the individual market, according to the Families USA report. Sixty-six percent of those people would qualify for tax subsidies or expanded Medicaid coverage.

Additionally, Pollack said, the individual insurance market is extremely volatile: Only 35.5 percent of people with health plans from the individual market retained that coverage for more than a year, and the median duration for individual market coverage is eight months.

“The net result is that only a very tiny portion of the non-elderly population [nationally], less than 1 percent — by our calculation, 0.6 percent — are at risk of losing their current individual insurance market plan due to the Affordable Care Act and not becoming eligible for financial help,” said Pollack.

In Texas, the percentage is slightly smaller: 0.5 percent of those in the individual market — 113,460 Texans — who would have likely retained coverage for more than a year could have their plans terminated because of the Affordable Care Act.

In comparison, Texas' decision not to expand Medicaid will leave more than a million residents without health insurance options in 2014.

Although the report does not specify how many of the people whose plans have been terminated would have qualified for Medicaid, Pollack said Texas’ decision not to expand Medicaid doesn’t significantly impact their analysis, because those people are often too poor to purchase health plans in the individual market.

“The people at greatest risk and harm are those people below the federal poverty level,” because they won’t have any coverage options available, said Pollack.

This story was produced in partnership with Kaiser Health News, an editorially independent program of the Henry J. Kaiser Family Foundation, a nonprofit, nonpartisan health policy research and communication organization not affiliated with Kaiser Permanente.