The IUSB Vision Weblog

The way to crush the middle class is to grind them between the millstones of taxation and inflation. – Vladimir Lenin

Washington Examiner: We Read the Bill – What Will Happen to Your Health Insurance Coverage?

Posted by iusbvision on July 31, 2009

A MUST read from the Washington Examiner. A great explanation of what will happen to your insurance coverage if these bills in Congress become law.

Examiner:

Most insured Americans get their health coverage through an employer. But a minority of about 6 to 8 percent — mostly the self-employed, students, and others who lack a generous employee benefits package — carry individual policies.

Individual plans tend to cost more. Although they lack the tax deductability of the group market, they do have the advantage of portability. Affordable, high-deductible plans can usually be found and paired with Health Savings Accounts, for some tax advantages, and the self-employed often have no other choice.

So what happens to people with individual policies after ObamaCare begins? It depends.

In the Senate Democrats’ bill, individual policyholders can keep their coverage, but they will be penalized under the individual mandate as though they did not have any coverage at all. That would be the death-knell of individual policies, says the Heritage Foundation’s Ed Haislmaier. Insurers, he says, “could exit the market entirely.” (The Senate bill is similarly merciless when it comes to employer-based plans that don’t conform with the rules for the planned government-run exchanges. In other words, the Senate bill, unless changed, will force your employer to change your coverage — maybe just a little bit, but perhaps dramatically.)

House Democrats’ bill, on the other hand, would grandfather individual policy-holders. They could keep their coverage and even add dependents over time. But no new individual policies could be sold as of the first year ObamaCare begins.

Under the best-case scenario, grandfathered individual policies would continue to exist until all of their holders die. But in all likelihood, economic and regulatory forces would conspire against them. The worst case would be a collapse of private insurers, but it doesn’t have to get that bad for individual policies to disappear. For example, if enough individual policy-holders are lured away by the subsidies that will be available for policies in the government-run insurance exchanges, insurers might find that they don’t have a viable risk-pool in the dwindling individual market anymore. They could drop out of the individual market, and they will feel more pressure to do so as patients age.

The bottom line: Under ObamaCare, your individual insurance policy is probably doomed, even if it is grandfathered. You might be eligible for a subsidized exchange plan, but if your income is too high, you will have to pay premiums that are inflated by other people’s subsidies.

For a good example of how the world can go wrong without a viable private individual market for health insurance, look to Maine. Esurance.com will not sell policies to anyone with a Maine zip code because individual insurers left the state years ago. They were mostly driven away by unreasonable state coverage mandates (marriage counseling must be covered by all policies, for example) and the requirement that every applicant be approved, no matter how sick they already are.

The only individual health insurer in Maine today is the one that runs Dirigo Choice, the state’s unique “public option” plan. Dirigo’s employer-based small business and self-employed plans closed enrollment in 2007 because the program has proven fiscally unsustainable. Its individual policy has become unaffordable — premiums have nearly doubled to $1,489 per month for a family plan.

As a result, coverage is nearly impossible to obtain for those who are self-employed and have too much income for Medicaid — in Maine, that’s about $45,000 for a family of four (which partly explains why 23 percent of the state is on Medicaid). Only the employer-based group plans have survived, because they are covered under federal benefit laws that pre-empt Maine’s laws.

Dirigo Choice executives compare their program to what Congress is attempting with its public option proposal. To be fair, the House and Senate versions of ObamaCare differ from Maine’s approach in several ways. Yet both plans are similar in that no one can figure out yet how to make them fiscally sustainable. The great danger is that, with new coverage mandates and rules requiring approval of all applicants, the insurance exchange plans that President Obama envisions could begin to look like Maine, with reduced benefits and skyrocketing premiums. If that happens, the self-employed could be without any reasonable options.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

 
%d bloggers like this: