Policy Cancellations: What's The Worst Thing That Could Happen?

| by Sarah Fruchtnicht

Gov. Chris Christie (R-N.J) said Tuesday that President Barack Obama didn’t tell Americans “the truth” about the extent to which Obamacare would affect their existing insurance plan.

In light of the HealthCare.gov web glitches, Christie told “CBS This Morning” that he stands by his decision against a state-run exchange.

“The real problem is that people weren’t told the truth,” Christie said. “If you remember, they were told, that they would be able to keep their policies if they liked them. And now you hear hundreds of thousands of people across the country being told they couldn’t.”

“The White House needs to square that with what was told to the American people and told to the Congress beforehand and it doesn’t seem to square at the moment,” he added.

NBC News reported Monday that the administration knew that 40 to 67 percent of customers would receive cancellation notices when Obamacare rolled out, even if they liked them.

The reason these policies from Blue Cross Blue Shield (BCBS), Wellpoint, Aetna, Cigna, United Health and others are being canceled is because they don’t meet minimum coverage requirements under the new law and they weren’t purchased before Mar. 23, 2010. Or they were purchased prior to Mar. 23, 2010, but the coverage has been “significantly” modified since then. These “Mar. 23, 2010” stipulations are part of the Patient Protection and Affordable Care Act’s “grandfather clause.”

Given the already high turnover of the individual marketplace, the White House admitted in 2010 that the grandfather rules would affect a large percentage of policyholders. Whether a policy was grandfather in or not, it would appear that its days were numbered. The days of denied coverage and pages and pages of exclusions are over.

When people receive cancellations, they are going to turn to the marketplace, unless their current company offers them a competitive price on a policy that does meet the new insurance standards. Florida Blue, a division of Blue Cross Blue Shield, offered an alternative to 300,000 policyholders to continue coverage with their company.

Insurance companies are now forced to compete if they want survive, but how will they profit under Obamacare? We’re moving from a health-based insurance market to an income-based insurance market. The age-old method was extending insurance to young, healthy people who rarely use health care benefits. Good health meant a much lower premium than a sickly person, and being very sick could mean no coverage at all. The young and the healthy paid monthly premium and made little use of their insurance, leading to profit for the company.

Companies will likely find another way to make a profit.

Dianne Barrette, 56, told CBS that Blue Cross Blue Shield sent her a letter in September informing her that in January of 2014 she will lose her $54 per month plan. BCBS offered her another plan that costs $591 a month.

But what about the healthy people who reaped the benefits of the old system?

Now the market will insure anyone, regardless of health, but weary insurance providers have begun warning America’s youth that eventually they’ll be the one’s subsidizing healthcare for America’s sick.

While healthy 20-somethings might get a great quote in the marketplace right now, what will happen to their premium in 10 years, when they’re marking $47,000 a year and are still the picture of health? They’re the only ones in the marketplace with the money to pay higher premiums, but they’re not using their benefits. Why would premiums go up in the first place? Because the marketplace contains a whole new demographic, the sick who were formerly denied coverage because they would be using benefits often.

Sources: TheBlaze, ThinkProgress, NBC News, CBS