January 15, 2014
It turns out that in an obscure report buried in a June 2010 edition of the Federal Register, [http://www.gbacapg.com/FedRegister%202010_14488.pdf] the Obama Administration predicted the mass cancellations of insurance policies that we saw last fall. Unfortunately what we saw last fall is not the end of the wave of cancellations.
Section 1251 of the Affordable Care Act contains a “grandfather” provision that, in theory, allows people to keep their existing plans if they like them. But subsequent regulations from the Obama administration interpreted that provision so narrowly as to prevent most plans from gaining this protection. We’ve seen the initial stages of that turnover already.
But, here is what has yet to arrive…
“The Departments’ mid-range estimate is that 66 percent of small employer plans and 45 percent of large employer plans will relinquish their grandfather status by the end of 2013,” wrote the administration on page 34,552 of the Register. All in all, more than half of employer-sponsored plans will lose their “grandfather status” and become illegal. According to the Congressional Budget Office, 156 million Americans—more than half the population—was covered by employer-sponsored insurance in 2013.
All together, about 93 million Americans will receive cancellation notices. So, the 6 million individuals who have received them thus far is the tip of the iceberg. If you’ve heard the calamity arising out of 6 million cancellations, imagine what another 87 million cancellations will do?
Another 25 million people, according to the CBO, have “nongroup and other” forms of insurance; that is to say, they participate in the market for individually-purchased insurance. In this market, the administration projected that “40 to 67 percent” of individually-purchased plans would lose their Obamacare-sanctioned “grandfather status” and become illegal, solely due to the fact that there is a high turnover of participants and insurance arrangements in this market. (Plans purchased after March 23, 2010 do not benefit from the “grandfather” clause.)
The real turnover rate would be higher, because plans can lose their grandfather status for a number of other reasons.
Associations with their own private health insurance and employee benefit marketplaces will have prepared their members for this tsunami so that they will have the safe, reliable place to go to make their orderly, ACA compliant choices to build and plan for benefit programs. Letting them know what’s coming establishes associations as being on top of this and in front of the wave so that they can help their members avoid the hit.
We can build a marketplace for you.