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Home Publications Blogs Beat the Press You Can Keep Your Insurance and the Washington Post Fact Checker: Round II

You Can Keep Your Insurance and the Washington Post Fact Checker: Round II

Monday, 11 November 2013 08:08

Glenn Kessler, the Washington Post fact checker, again took a swipe at the Obama administration over its claim that under the ACA people would be able to keep their insurance if they liked their plan. (He earlier had given Obama the maximum of four Pinocchios over the issue.) The proximate cause is the administration's efforts to blame insurers for cancelling plans, pointing out that the plans that were in place at the time the ACA was passed would be grandfathered and therefore would not be eliminated due to the requirements of the ACA. 

Kessler responds by noting that the vast majority of plans in the individual market are for short periods of time. He presents evidence showing that 48.2 percent of individual plans are in effect less than 6 months and 64.5 percent are in effect less than year. Extrapolating from this evidence on the rate at which individuals leave plans, Kessler calculates that less than 4.8 percent of the people in the individual market have a plan that would be protected by this grandfather provision. Based on this assessment, he awards the Obama administration three Pinocchios for trying to blame the insurers for dropping plans.

While Kessler is undoubtedly correct in noting that few people would be protected by the grandfather provision, there are two important points worth pointing out. First, the vast majority of people hearing President Obama's pledge would be covered by insurance through their employer. For these people it is absolutely true that the ACA allows them to keep their insurance.

As far as the minority in the individual market, while Kessler is correct that the grandfathering protects relatively few people because policies tend to be short-lived, this data also raises an issue about the pain caused by earlier than expected cancellations. Kessler's data show that almost half of the plans will be held by people for less than six months and almost two-thirds will be held for less than a year. This means that most of the people being told that their plans are being cancelled probably would have left their plans in the first half of 2014 anyhow. While no one wants to buy insurance more than necessary, it hardly seems like a calamity if someone expected to leave their policy in March and will now have to arrange insurance through the exchange for two months.

Furthermore one has to ask about the role of insurers in this process. Kessler's data imply that more than three quarters of the people in the individual market signed up for their policies for the first time in the last year. Didn't insurers tell people at the time they sold the policies that these plans would only be in effect through the end of December because they did not comply with provisions in the ACA? If the insurers did inform their clients at the time they purchased their policies then they would not be surprised to find out now that they will need new insurance. If the insurance companies did not inform clients that their plans would soon be terminated then it seems that the insurers are the main culprits in this story, not the Obama administration.  

Comments (13)Add Comment
Dr. Baker's Hypothesis is Correct
written by robertsalzberg, November 11, 2013 8:59
I bought an insurance policy effective September 1st and got a letter that was sent October 3oth that it was being cancelled at the end of this year because of the ACA. No mention in the notification that my plan didn't meet the minimum requirements.
written by JDM, November 11, 2013 9:27
The motto of modern America is "Business is Blameless".
It's the nature of that "market"
written by Jennifer, November 11, 2013 10:11
It can't be said enough that the percentage of people in the individual markets is small, and that market itself is highly volatile. Historically people have had policies canceled or radically adjusted without much notice all the time. Now, some insurance companies have a handy excuse besides "just because".
It's noteworthy that as Jonathan Cohn estimates, of the 12-14 million in that market, the vast majority will wind up-post subsidies-with better coverage and paying less or about the same. The number of people who are actually *paying more* will be a fraction of that number.
On the other hand it's estimated that 13 million will eventually sign up for Medicaid. That is, many people will have insurance who had none before.
It's telling which one of these stories is front and center in the press.
Fact Check This Glenn Kessler
written by Last Mover, November 11, 2013 10:14

It's amusing to watch the faux angst over health insurance policies getting canceled by truth telling "fact checkers".

In economics is a concept called hit-and-run competition along the lines of the lemon car theory by George Akerlof. It means sellers take advantage of buyers for one-time sales due the heavy skew of info on what is known about the product in favor of the seller over the buyer. In America this has become the rule instead of the exception.

Insurance is a classic case of the lemon car theory with a twist - repeated sales for which the info skew never gets corrected. The sellers keep changing the terms and conditions of the contract to continue selling lemons instead of what buyers think they are getting. It's especially a problem with insurance because it's never discovered until after the fact when benefits due are denied.

Despite its other substantial problems, one thing Obamacare accomplished was to stop the huge level of fraudulent sales of lemon health care insurance to gullible or desperate buyers. That some policies not considered lemons got caught up in the dragnet along the way is peanuts compared to the overwhelming benefits for the rest.

Short-lived policies are the norm and therefore the excuse for the problem? Where are the fact-checking reports by Glenn Kessler on millions denied health care due to such bait-and-switch policies?

Because prices were too high to buy it. Because care was denied after buying it. Because illness, disease and death prevailed due to both. How many Pinocchios did Kessler assign to private health insurers for lying in the fine print?

Then when Obamacare appears on the scene, Kessler suddenly decides to play economist and do a homemade analyis of cost and benefits. Oh look, over there, the price went up and the quality went down and it broke the binding contract made between the President and the people of America.

Why yes, of course, the binding contract ... like the ones insurance companies sell all time don't they Glenn Kessler ... you know, the ones you never wrote about because there were no facts to be checked were there.
Understanding the Math
written by Paul, November 11, 2013 10:20
If I understand this correctly, the fuss is all about the fact that when Obama was addressing the concern that people would lose access to their beloved health insurance and long term doctor, he said that Obamacare would not cause this to happen because the same insurance companies would still be offering the policies rather than enforcing a public option on people. Kessler is now telling me that Obama lied because in reality policies could be dropped on the fraction of people in the Individual Market (9% of the US Population) that keep their coverage for more than a few years (4.8%) and thus might have beloved long term health insurance that covers a specific doctor. So, the Pinocchios are because Obama's statement was obviously true for only (1-0.09*0.04)x100 = 99.6% of the population, and not 100%, therefore he was clearly lying. Of course, we still don't know what fraction of the affected 0.4% will really lose their doctor or end up with worse health insurance.
written by AlanInAZ, November 11, 2013 11:54
This is truly a bizarre "controversy". The group with the most benefit from the ACA are those in the individual market. The media coverage would lead to think that this group has the most to lose.

Time for "Beat the Baker"
written by Privately Insured, November 11, 2013 1:26
Come on Dean. I'm probably a bigger fan of the ACA than you, but compare this:

"If the insurance companies did not inform clients that their plans would soon be terminated then it seems that the insurers are the main culprits in this story, not the Obama administration".

...with the Presidents repeated post 2010 statement that you could keep your Health plan if you liked it. Rather than that spin, he should have been honest about the "ACA 1.0" plans that include free preventative checkups, and so much more (just look at http://floridabluehealthcarereform.com/timeline).

These new plans were a stepping stone to the fair ones starting in 2014. This was a rare chance for a politician to tell the truth with a compelling story to back it up.
If You Like Your Old 1950s Car, You Can Keep It
written by Paul Mathis, November 11, 2013 1:59
But if you buy a new car, it will have airbags, seatbelts, pollution controls, anti-lock brakes, traction control, etc. The whole point of government regulation is to improve products on the market for the benefit of everyone because private industry cannot do it on its own.

So this comment: " While no one wants to buy more insurance than necessary" is wrong. The government is always regulating the market place for the good of everyone. In this case, better insurance coverage is for the benefit of all by eliminating freeloading by those who opt for the least possible coverage or no insurance and then pass their costs on to the rest of us by utilizing emergency rooms.

The whole point of the ACA was to eliminate freeloading on the healthcare system by individuals who opted for junk insurance or no insurance. Everyone is required to have minimum coverage just like every car must have seatbelts.
A total mess
written by xyzzy, November 11, 2013 2:36
I love watching people defend a horrible law, written by idiots.

There is no logical explanation as to why the burden for paying for the sick and uninsured should fall on the already vulnerable group that pay for their own insurance. The 80% who get their insurance from their employers are forcing the 5% who are buying their own insurance to cover the previously uninsured.

Only a truly insane actuary would think this makes any sense and would herald it as an improvement.

All the flowery words and patting on the back about increased coverage is a cover for the fact that in order not to scare the 80% who might have had to change their policies and deal with a tax on their health plans, the majority forced the minority to bear the extra costs.

Another victory for America
none, Low-rated comment [Show]
written by Last Mover, November 11, 2013 4:19

@Paul Mathis
... pass their costs on to the rest of us by utilizing emergency rooms.

No way. Absent Obamacare, do you really think private hospitals would reduce other prices if emergency room costs went down? Never. They always charge what the market will bear, so with Obamacare it won't happen either, voluntarily.
The government is always regulating the market place for the good of everyone.

What? Since when is patent regulation that allows Big Pharma to overcharge $270B/yr for drugs good for everyone?
Fool me once
written by Xcpt, November 12, 2013 1:06
Anyone that considers the government is going to help them and provide any reasonable level of service should consider the history of the American Indian. The bigger issue at hand is that it is now ILLEGAL not to buy health insurance. The ACA has empowered the government to force you to buy a product you may not ever use, or need, under the premise that somebody else can't afford their own.

Maybe when they pass the "Affordable Entertainment Act" where you have to buy movie tickets for shows you will never watch, or want to see, or have any interest in supporting as propaganda, because someone else can't afford them you will understand the true nature of what has happened. The precedent has been set and you applaud it like a bunch of fools.
Why Didn't The Administration Speak Up?
written by jerseycityjoan, November 13, 2013 4:15
"If the insurance companies did not inform clients that their plans would soon be terminated then it seems that the insurers are the main culprits in this story, not the Obama administration."

I agree that insurance companies should have spoken up. They did not. They chose not to inform people of important information that could have a major impact on people's lives -- and certainly their finances. But they were not legally required to so, and nobody elected them to watch out for their interests.

But the Obama Administration should have spoken up too. They did not. They chose not to inform people of important information that could have a major impact on people's lives -- and certainly their finances. Unlike the insurance companies, however, because they had told people they could keep their plans they were morally and ethically required do so. And also unlike insurance companies, our leaders in Washington were elected to watch out for our interests.

This was a grossly mishandled situation.

Insisting that every American has to be a lawyer, accountant and insurance expert who can pick through the vast array of information that comes out of Washington (or does not come out of Washington but should) to determine what is the truth, what is a half-truth, what is propaganda and what is misinformation just doesn't cut it.

Americans have lives to lead. They are not experts in law, accounting and insurance.

We have people in charge who afraid to speak unpopular truths. The problem is not with the American people on this issue. It is a lack of leadership problem and a lack of common sense problem. Ducking on this one was never going to work.

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About Beat the Press

Dean Baker is co-director of the Center for Economic and Policy Research in Washington, D.C. He is the author of several books, his latest being The End of Loser Liberalism: Making Markets Progressive. Read more about Dean.