One of the most fervent promises President Obama made to the American people before his health overhaul law passed in 2010 was “If you like your health care plan, you will be able to keep your health care plan. Period. No one will take it away. No matter what.”
But, even before the law fully takes effect in 2014, health insurers are dropping out of markets in many states, causing millions of people to lose “the coverage they have now,” and tens of millions more surely will follow.
Carriers don’t want to leave the customers and markets they have been serving, often for decades, but they are being forced to walk away from significant investments in many states to cut anticipated losses.
Some of the carriers are leaving because of onerous state regulations, others are victims of a faltering economy, but costly new federal rules and regulations and the many more that are to come as a result of the Patient Protection and Affordable Care Act (PPACA) are accelerating the exodus.
During the debate over the health law, liberals strongly opposed giving private health insurers such a large role in expanding coverage, and fought hard to include a government-run plan. But the Obama administration may be able to achieve liberals’ goal in a different way by suffocating private plans under a mountain of regulation and choking them with impossible cost tests.
Individuals, small businesses, and people buying child-only policies are being hit in the first wave of dropped coverage.
Some examples: In New York, Empire BlueCross BlueShield said it is no longer offering health insurance plans that cover about 20,000 businesses. Mark Wagar, president and CEO of Empire, said that the company will eliminate seven of the 13 group plans it currently offers to businesses which have two to 50 employees. The move is expected to have a great and potentially “catastrophic” impact on small businesses in New York, according to James L. Newhouse, president of Newhouse Financial and Insurance Brokers in Rye Brook, NY.
In Colorado, World Insurance Company/American Republic Insurance Company announced it is leaving the individual market, citing the company’s inability to comply with insurance regulations. This means higher prices for consumers who no longer have this affordable coverage option.
In Indiana, nearly 10 percent of the state’s health insurance carriers have withdrawn from the market because they are unable to comply with federal requirements on how premium dollars must be allocated. Indiana Gov. Mitch Daniels tried to bring the companies back by asking Washington for a waiver from the rule, but the Obama administration refused his request.
The American Enterprise Group announced last fall it would stop offering non-group health insurance in more than 20 states. As a result, 35,000 people will lose the health coverage they have now. The company cited regulatory burdens in explaining its decision to leave the markets.
Principal Financial Group, based in Iowa, announced in 2010 that it would stop selling health insurance, impacting 840,000 people who receive their insurance through employers served by the company. The company assessed its ability to compete in the new environment created by PPACA and concluded its best course was to stop selling health insurance policies.
Cigna announced that it is no longer offering health insurance coverage to small businesses in 16 states and the District of Columbia: California, Connecticut, Florida, Georgia, Hawaii, Illinois, Kansas, Missouri, New Hampshire, New York, North Carolina, Ohio, Pennsylvania, South Carolina, Texas, Virginia, and Washington, D.C.
Since June of 2010, 13 plans have left the health insurance market in Iowa, citing regulatory concerns.
In New Mexico, four insurers — National Health Insurance, Aetna, John Alden, and Principle — are no longer offering insurance to individuals or to small businesses — drying up the market and driving out competition.
In Colorado, Aetna will stop selling new health insurance to small groups in the state and is moving existing clients off its plans this year, affecting 1,200 companies and 5,200 employees and their dependents. Aetna also has pulled out of Colorado’s individual market because of concerns about its ability to compete there, dropping 22,000 members. Aetna also has dropped out of the small-group market in Michigan and several other states.
In Virginia, UniCare has eliminated its individual market coverage for about 3,000 policyholders. And shortly after the health law was enacted in 2010, a new Virginia-based company, nHealth, announced it was closing its doors, saying that the regulatory burdens posed by the health law made it impossible to gain investor support to continue operating.
These announcements that carriers are leaving markets accelerates a trend that the American Medical Association says means four out of five metropolitan areas in the United States do not have a competitive health insurance market. The report found that in about half of the metropolitan markets, at least one health insurer had a commercial market share of 50 percent or more. In 24 states, the two largest health insurers had a combined commercial market share of 70 percent or more.
This is a negative and destructive trend, leaving fewer carriers to serve these markets and giving small businesses and the insurance agents who serve them less leverage to negotiate better benefits and lower rates among competing companies.
One of the provisions of the health law that the Obama administration touts most enthusiastically is the requirement that employers who offer dependent coverage allow employees to add their 26 year old “children” to their policies. It is highly ironic, then, that another provision is causing huge losses of coverage among children whose parents or guardians were buying health insurance policies for them.
Health and Human Services Secretary Kathleen Sebelius told health insurers shortly after PPACA was enacted that they must write policies for children under 19, including those with pre-existing conditions, no matter when their parents and guardians apply. This creates an incentive for parents to wait to buy the coverage until the children have a significant medical condition.
This in turn creates a substantial risk of “adverse selection,” which makes it financially unsustainable for health plans to continue to offer these policies. Rather than wait for this to happen, many carriers have decided to leave this market altogether. In at least 17 states, child-only policies no longer are available.
Clearly, millions of people are having their coverage disrupted, violating the promise that President Obama — and virtually all of those in Congress who voted for the law — made to the American people. This is one reason why the American people opposed the law when it was enacted and continue to support repeal so we can get on a path to reform that reforms, rather than destroys, markets.
Posted on Forbes: Health Matters, January 17, 2012.