One of the main selling points President Obama repeated during the
campaign for health care reform was that “if you like your health care plan, you can keep your health care plan.”
But critics of the reform bill say the President’s claim is a false promise.
Republicans warn that the new health law will force Americans off their current insurance plans and into a government pool. Even funny man Jon Stewart of
The Daily Show expressed his skepticism about the Administration’s promise in a recent interview with Health and Human Services Secretary Kathleen Sebelius. Stewart stated that the new regulations would cause employers to dump their insurance plans creating a “sort of a “back door” of government, not a takeover necessarily, but of a government responsibility for the health care.”
So is the President’s statement about keeping your insurance a false promise? Will you be able to keep your insurance if you like your current plan? Let’s examine the claim.
Does reform create an incentive to drop coverage?Approximately 160 million Americans currently get their health insurance through their place of work. Instead of completely overhauling the existing health care system, the President’s plan leaves
employer-based insurance and Medicare in place, but sets new regulations on health insurance companies and creates an insurance exchange that could indirectly change how people are covered.
The insurance exchange creates a virtual marketplace for individuals and small businesses. The government ultimately has control over regulating this exchange to ensure that insurance companies keep prices fair and don’t exclude people with pre-existing conditions from coverage. One of the choices available on the exchange is known as the public option, which will offer consumers a basic level of coverage at the lowest rate possible.
Because the public option will be cheaper than other insurance plans, some experts predict that small companies will drop coverage altogether forcing their employees on to cheaper public plans.
Douglas Holtz-Eakin, the former director of the Congressional Budget Office (CBO) who now heads the American Action Forum, estimates that because mandates on businesses are so restrictive, most firms will see little incentive to offer coverage to their employees. He suggests that businesses will dump their health plans and instead pay a penalty fee and higher wages to make up for the loss of insurance.
President Obama maintains that under his reform plan the government will not make individuals change plans or doctors. Though some businesses may shift their coverage, the President argues that inaction would cause premiums to skyrocket leaving many employers unable to provide health insurance at all.
There are still many details to be worked out in Congress over how the health insurance exchange will run and how many companies will be allowed to participate in the exchange. These decisions are to be made by an independent commissioner that will be appointed by the President. Until these specifics are determined, it is hard to predict how the public option will affect small businesses and their decision to retain insurance for their employees.
The “grandfather clause.”The President’s health reform bill also includes a “grandfather clause,” which states that an insurance plan that existed before the health reform law won’t fall under many of the new regulations. But there’s a catch. Insurance plans could lose their grandfather status if a company changes employee coverage for the worse. So if a business offering their employees insurance wanted to raise premiums on their plans to help cover cost, those plans would lose their grandfather exemption and would have to adhere to all of the health law’s regulations – effectively changing employees’ insurance plans.
Because of these new requirements, even small changes to insurance plans would put companies at odds with the law and would make insurance more expensive. Conservative think tanks like the Heartland Institute argue that reforms deter businesses from shopping around for more affordable plans out of fear they will lose their grandfather status and will end up paying more for employee coverage. This would force small businesses to drop their insurance plans and could cause up to 66 percent of small business workers to lose their coverage.
The bottom line.The nonpartisan CBO estimates that up to 20 million people could lose their coverage under the new health care reform system. But this number represents the worst-case scenario, and the law could very well increase the number of people with employer-based coverage by 3 million.
The truth is that until the legislation gets closer to being fully enacted, it is hard to determine how many companies will opt to change coverage for their employees. It is likely that many people will see little to no change in their plans, while some –especially those working for small businesses -- may see significant changes to their coverage.
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