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Health Reform Means Transition to More Secure Coverage in Individual Market

The fact that insurance companies are discontinuing some plans they offer in the individual market is getting a lot of attention.  Unfortunately, some media reports have confused the issue and blown it out of proportion.  Here are five things to keep in mind:

  • Well over 90 percent of Americans with health coverage get it through an employer or a public program such as Medicare or Medicaid, not through the individual market.  So the changes that insurers make to individual-market plans won’t affect them.
  • Insurance companies change the plans they offer and elements such as benefits and cost-sharing charges all the time, with or without health reform.
  • Thanks to health reform, people buying coverage in the individual market for 2014 will have an array of options for good-quality coverage inside and outside the exchanges (also known as “marketplaces”).  Coverage must meet basic standards related to benefits and cost-sharing charges — standards that many of the plans offered in the individual market before health reform didn’t meet.  Also thanks to health reform, people don’t have to worry anymore that insurers will charge them more or deny them coverage altogether because of their health status.
  • Many people — including people now buying coverage in the individual market — will be eligible for federal premium tax credits starting next year, which will bring down their costs substantially.  Media reports about people reacting to the news that their policies are ending often don’t say whether they might be eligible for these credits to buy a new plan through the exchanges.  With some very basic information, you can estimate a person’s eligibility using the Kaiser Family Foundation’s subsidy calculator.
  • The issue of insurers transitioning to new plan offerings in 2014 isn’t the same as the issue of “grandfathered” plans, though some media reports have confused the two.

    Here’s the background.  To minimize disruptions in the insurance market, health reform allowed insurers to continue to offer plans that existed when the law was enacted in March 2010 even if these plans didn’t meet certain health reform rules, such as covering certain preventive services at no cost to enrollees.  But if insurers changed a “grandfathered” plan significantly, it would lose grandfathered status and would have to meet any applicable health reform standards.  This makes sense, since it would no longer be the same plan that pre-dated health reform.

    No one expected many of these grandfathered plans to stick around for very long.  Insurers in the individual market can’t sell them to new enrollees, and as was widely reported in 2010 —including
    by us — the federal government estimated that 40-67 percent of individual market policies (and about half of all employer plans) could lose grandfathered status by 2013.  Also, turnover is high in the individual market, so many people who initially benefitted from grandfathering have switched to something else.  We don’t know how many of the people affected by plan discontinuations are in grandfathered plans, but this suggests that many of them aren’t.