Sebelius admits that employer-based plans will face same grandfathering caveats as lost individual plans

by 1389 on November 6, 2013

in "Obamacare", 1389 (blog admin), unemployment

Old VW Bug with license plate 'FEATURE'
Forced insurance cancellation? That’s not a bug – it’s a feature! has Kathleen Sebelius’ testimony at this link.

Here’s what this means in real terms:

In 2015 or soon after, expect to lose your employer-based medical plan.

Of course, this assumes that, in 2015, you will still be employed full time with a company offering medical benefits, and/or your spouse’s employer won’t already have eliminated coverage for you. In this part-time economy – again thanks to Obamacare – you’d be a fool to bet on that.

Only two percent of existing health plans meet the bureaucratic nightmare standards of the “Affordable Care Act.” Even for that two percent, the premiums will climb and keep climbing.

If you are in that 2% and your ACA-approved employer-based plan happens also to be a so-called “Cadillac plan” (with especially high benefits), you’ll probably lose it anyway! Obamacare imposes a 40% excise tax on benefit programs that exceed $10,200 for individuals and $27,500 for families. That creates a strong incentive to cut benefits to below that level.

As for the other 98 percent of plans that you hoped would be “grandfathered,” the ACA is designed to phase them out as rapidly as possible.

According to an Obama Administration estimate from June 2010:

“The Departments’ mid-range estimate is that 66 percent of small employer plans and 45 percent of large employer plans will relinquish their grandfather status by the end of 2013,” wrote the administration on page 34,552 of the Register. All in all, more than half of employer-sponsored plans will lose their “grandfather status” and become illegal. According to the Congressional Budget Office, 156 million Americans—more than half the population—was covered by employer-sponsored insurance in 2013.

Another 25 million people, according to the CBO, have “nongroup and other” forms of insurance; that is to say, they participate in the market for individually-purchased insurance. In this market, the administration projected that “40 to 67 percent” of individually-purchased plans would lose their Obamacare-sanctioned “grandfather status” and become illegal, solely due to the fact that there is a high turnover of participants and insurance arrangements in this market. (Plans purchased after March 23, 2010 do not benefit from the “grandfather” clause.) The real turnover rate would be higher, because plans can lose their grandfather status for a number of other reasons.

That was a projection for insurance plan cancellations as of the end of 2013.

By the time the employer mandate applies in January 2015, an even greater percentage of employer-based policies will have lost “grandfather status” and been cancelled.

Here’s why: For each plan that is still grandfathered, the first time the insurance company or the employer needs to make any change to the coverage – something which happens often – the plan will lose its “grandfather status” and it must be canceled and replaced by an ACA-compliant one. The attrition rate is designed to be high.

An ACA-compliant plan is a plan that most employees won’t like. Because the ACA requires everyone to pay for types of coverage that they don’t need and will never use, each insurance carrier will make up the difference with steeper premiums, huge out-of-pocket expenses, and much smaller provider networks. Because of rising deductibles, patients are already being forced to cough up thousands of dollars in cash before hospitals and doctors render any services at all.

In short, many of these ACA-approved plans offer so little real benefit that, in at least some instances, it’d make sense for companies to stop offering health benefits even to full-time workers, and instead simply pay the $5000 annual Obamacare head tax for each uninsured legal US-based employee.

Who pays? Obamacare is a tax, and except in a bookkeeping sense, companies can’t pay taxes. Companies must pass all of their costs along to individuals: their customers, as higher prices; their employees, as lower payrolls; their stockholders, as poorer dividends and lower stock prices. If you have an IRA or a 401-K plan, you need look no further than the mirror to see one of those corporate stockholders. Those companies that can no longer remain profitable will shut down, and the economy will further contract.

Previous post:

Next post: