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A Radical Restructuring of Health Insurance December 8, 2011 ,

One of the most fervent promises President Obama made to the American people before passage of the health overhaul law 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, millions of people are losing “the coverage they have now,” and tens of millions more surely will follow.

A major survey of employer plans provides evidence. McKinsey & Company surveyed 1,300 employers across industries, geographies, and employer sizes, and concluded that the Patient Protection and Affordable Care Act (PPACA) will lead to a “radical restructuring” of job-based health coverage. McKinsey found that 45 to 50 percent of employers say they will definitely or probably pursue alternatives to employer-sponsored health insurance in the years after it takes effect in 2014. One-third of employers say they “will definitely or probably drop coverage after 2014.” Among employers who knew most about the new health law, half said they were likely to drop coverage.

Since an estimated 156 million non-elderly Americans get health insurance at work, according to the Employee Benefit Research Institute, that means as many as 78 million people could be forced to find other sources of coverage.

So clearly President Obama’s key promise will be broken after the law fully takes effect. But the deterioration in coverage already has begun as many people already are losing the coverage they have now as health insurers are dropping out of markets in many states. Some of the carriers are exiting because of onerous state regulations, others are victims of a faltering economy, but the cascade has been accelerated by the rules that already have taken effect and the many more that are to come as a result of PPACA.

In this paper, we provide:

  • an overview of carriers leaving the private health insurance market
  • the impact of Obama administration rules on the child-only health insurance market
  • the disruptions caused by rules governing health premium payouts and “grandfathering,” and the threats to the Medicare Advantage market