"If you like your plan you can keep it" revisited

Yesterday, in light of the Aetna announcement (coming on top of similar bombshells from UnitedHealthcare and Humana earlier this year), I took a stab at trying to calculate just how many current exchange-based enrollees will lose whatever plan they're currently enrolled in whether they want to switch to a different one or not. My conclusion is that up to 2 million of the 11 million or so will not, in fact, be able to "keep their plan if they like it" due to either the carrier going belly-up (4 more co-ops), the carrier pulling out of their county/state (UHC, Humana, Aetna) or the carrier dropping certain types of plans (BCBS of Minnesota). The number might be a few hundred thousand higher than that, actually, since there are other, smaller carriers here and there making changes to their plan offerings and/or participation levels.

This, of course, once again brings up President Obama's infamous "If You Like Your Policy, You Can Keep It!" promise, which he made a whole bunch of times throughout the contentious battle to get the ACA passed back in 2009-2010.

As I noted back in 2014:

President Obama took a whole bunch of heat over his "If you like your policy, you can keep it!" statement, and in response to the backlash had HHS allow the individual states to extend "pre-existing" noncompliant policies by a year. Then, a few months later, they basically said "screw it" and said the states could let insurance companies keep those polcies around for 2-3 years if they wished. Some states did so; some didn't. Some companies bumped out the policies by one year, some by two and some by three.

As a result, the noncompliant policies are being spread out over 3-4 years instead of tearing the band-aid off all at once. Perhaps this is a good thing, perhaps not.

At the time, I didn't understand the full implications of that decision (and I'm guessing the Obama administration didn't fully appreciate it either). A year later, I did:

Why was this a problem? Well, for one thing, this seriously impacted how the actuaries for the various companies in each state calculated their premium rates for the brand-new 2014 ACA-compliant policies.

...Suddenly, Little Guy's pre-October actuarial enrollment projections for 2014 are meaningless. They thought that up to 40,000 inexpensive, low-risk potential customers were about to be put on the market for them to scoop up. Instead, most of those 40K are staying right where they are. Little Guy still has plenty of people to market themselves to...but they were relying on those 40K in particular, since not only is that group low-risk, they're also highly reliable (that is, these are people who have already been reliably paying their monthly premiums for many months or years).

Here's the worst part: President Obama's change in policy was made in mid-November, well after Little Guy's 2014 rates had been locked in stone. They were stuck with those rates for at least 1 full year, unable to change them until January 2015.

So, what happens? Well, instead of snapping up, say, 20,000 low-cost/low-risk enrollees along with another, say 20,000 higher risk folks, Little Guy ends up with perhaps 30,000 total...except a far higher percentage of these are high-risk, since they haven't been "pre-screened" by Big Blue already. However, their premium rates for all of 2014 are still based on their original assumptions.

Result? They take a beating throughout 2014, ending the year in the red.

OK, so the 1-year (or 2 year, or 3 year) extension was probably not a good thing in the end.

However, as I've noted many times before, President Obama's "If you like it you can keep it" statement would have been an impossible promise to keep regardless of how the ACA had been written, for a simple reason: Insurance companies drop one plan and replace it with another all the time, just like no one expects Apple to keep selling the same model of iPhone model for eternity even if they're making a big profit off of it.

Even if the ACA had allowed all existing noncompliant plans to remain in force forever (instead of only those enrolled in prior to March 2010), sooner or later those plans would have been discontinued by the carrier for various business reasons, including changing marketing strategies, mergers/acquisitions or going out of business altogether.

Now, as it happens, I believe that Minnesota has a law which requires insurance carriers to continue offering the exact same policy to current enrollees for as long as they wish to keep paying the premiums...except that the carrier can increase those premiums from year to year. I believe this situation played out in 2015 when PreferredOne became the first major carrier to drop out of a state exchange (it was big news at the time). As I understand it, PreferredOne was legally required to offer the same policies to their enrollees...off of the exchange, at full price (and that full price went up somewhat, of course). This had the same effect as forcing the vast majority off of their policies entirely, however, since instead of paying, say, $100/mo subsidized, they would have had to pay the full $500/mo (or whatever).

However, there isn't any such law at the federal level...and even if there was, you can't legally require a private corporation to not go out of business entirely.

Bottom line: This fall there's gonna be up to 2 million examples of why it was a silly thing for Pres. Obama to say.

That is all.