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Guest Column: The President lied, your insurance policy died

September 15, 2010

By Sally C. Pipes

“If you like your health care plan,” pledged President Obama, “you will be able to keep your health care plan.”

As the president brainstormed in favor of his health overhaul, that promise was a constant—appearing in speeches, media appearances, and all the administration’s literature. It was a lie.

Earlier this summer, the White House fessed up. By 2013, according to the administration, 8 in 10 employer-sponsored health insurance plans could be gone.

The departments of Labor, Treasury, and Health and Human Services recently released a package of rules for granting insurance policies’ “grandfather” status. Policies that abide by the rules will remain legal under President Obama’s health overhaul. Unfortunately, they’re so restrictive that most existing insurance plans will disappear.

Under the rules, employers are essentially barred from making any adjustments to their current health insurance arrangements. They can’t increase co-payments by more than $5 or 15 percent, whichever is greater. They can’t raise deductibles by more than 15 percent. And they can’t bump up the share an employee pays toward the cost of his health plan.

Such regulations ignore the fact that employers and insurers consistently tweak their plans to better serve beneficiaries and lower costs. The government report that contains the new rules even says so—according to the report, 48 percent of large employers and 66 percent of small employers altered a premium or a cost-sharing schedule in 2009.

Further, the rules prohibit businesses from switching insurance companies—even if they’re able to negotiate a better deal on a similar plan.

Health insurance costs are already set to rise nearly 10 percent in 2011. The grandfather rules expect employers to absorb the entirety of that increase.

Employers are damned if they continue providing insurance to their workers and damned if they don’t. They can offer the policies they’ve always offered and eat any cost increase. Or they can switch policies and comply with all of Obamacare’s costly mandates.

Unions, conveniently enough, won’t have to meet all the same requirements. Collectively-bargained plans are exempt from the grandfathering rules.

Eventually, as health insurance costs continue to escalate, even the best-off employers will not be able to comply with the grandfathering rules. The Obama administration is well aware of this fact. “At some time,” the government report states, “most plans will relinquish their grandfathered status.”

For many American workers, that time will be soon.

The administration estimates that up to 42 percent of employers could see their grandfather status revoked next year. By 2013, the percentage could be as high as 80 percent. Small businesses would be hit hardest.

What happens next? In Massachusetts, which implemented what amounts to a trial version of Obamacare in 2006, 90 small companies recently announced plans to drop employee health coverage. They’re encouraging their employees to sign up for state-subsidized plans.

Employers nationwide will no doubt do the same—they’ll respond to the new mandates and elevated costs by dropping their coverage altogether.

Workers who don’t want to go without coverage will be left with only one option: Enroll in the government-run health insurance exchanges, where, thanks to a bevy of new mandates, the government effectively designs insurance plans. Those government-approved plans come at a price—the Congressional Budget Office expects the premiums for individual plans like those bought through the exchanges to increase by 10-13 percent.

Premiums could go even higher if U.S. Rep. Lynn Woolsey (D-Calif.) has her way. She’s introduced a measure that would bring back the public option in 2014. This government-funded insurance plan could easily under-price private plans by filling any losses with taxpayer dollars. Eventually, private insurers would be driven from the marketplace, unable to compete with the government’s unfair rates. Eventually, the public option would be the only option.

As presidential promises go, the assurance that individuals can keep their health insurance plans was a whopper. The truth is, if you like your health care plan, well, tough luck.

Sally C. Pipes is president & CEO of the Pacific Research Institute. Her latest book, The Truth About Obamacare (Regnery 2010), was just released.

From the Sept. 15-21, 2010 issue

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