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Obamacare’s Little Noticed Victims

Small groups are quietly losing coverage too.

By 2.20.14

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Earlier this year, the New York Post wrote this about people who get their health insurance through the small-group market: “The 5 million-plus Americans who’ve seen their health plans canceled thanks to ObamaCare will be joined by millions more this year — because the Affordable Care Act makes their employer-provided policies illegal, as well.”

My fellow employees and I at the National Center for Public Policy Research (NCPPR) are among those millions. In mid-January, we each received a letter from our insurer, Kaiser Permanente, informing us “that because the plan currently offered by your employer does not include certain benefits now required under [ObamaCare], it will not be available at the time of your 2014 renewal.”

When I showed this letter to our president, David Ridenour, he replied, “You know, since we have less than 50 employees, this gives me an incentive to just drop our insurance and let you all go on the exchange.”

My wide-eyed reaction brought this response from him: “Don’t worry. We’re going to have insurance. I’m just saying that we face that incentive under Obamacare.”

Unfortunately, the cancellation of small-group plans may not get the same widespread press coverage that the cancellation of individual policies received late last year. One reason is that most individual policies for 2013 had a renewal deadline of January 1, 2014. If an insurer had to cancel a policy due to Obamacare, the letter had to be sent out in the last few months of 2013. In short, the cancellation letters came out over a concentrated period of a few months resulting in a cancellation number that quickly escalated, thereby keeping the attention of the media.

By contrast, small-group policies for 2013 will have renewal dates at the beginning of every month during 2014. Thus, cancellation letters will be sent out over an extended period of time, possibly resulting in depressed media interest. That would be unfortunate, because there are many Obamacare cancellation stories that need to be told.

Our Kaiser policy, which NCPPR has had since 1996, comes up for renewal on April 1, at which point we will have to switch to a new and probably more expensive one. If we switch to the platinum plan that Kaiser is recommending for us, our premiums will increase by about 6 percent. That’s not horrible, especially when compared to what other small groups are facing, but it’s not exactly welcome news either. However, since we will almost surely be staying with Kaiser, we won’t suffer the anxieties that can come with policy cancellations such as not knowing if your doctor will be covered under the new insurance.

The Franklin Center for Government & Public Integrity, a nonprofit specializing in investigative journalism, isn’t so lucky. Although most of its employees work in Washington, D.C., it was incorporated in North Dakota so it received its insurance through Blue Cross Blue Shield of North Dakota (BCBSND). It had a preferred-provider organization plan with a $1,000 deductible.

“We would’ve loved to have stayed with that plan,” said Erik Telford, senior vice president at the Franklin Center. But in early January, Telford received a letter from BCBSND informing him that the “health care reform law is complex. It means different things for different people. For you, it means your employer’s current plan needs to be discontinued effective April 1, 2014.”

The cancellation “has caused a lot of anxiety and unrest, especially among lower-level staff,” Telford said. “Employees are stressed about whether their doctor is included in whatever new plan we get. I’m worried about that as I like my doctors and I don’t want to find new ones. You find doctors that work with your plan, you find ones you like, and then to think that your whole health-care environment is changing—that’s a stressful thing.”

The health plans of NCPPR and the Franklin Center were supposed to be “grandfathered” under Obamacare since they were purchased prior to March 2010. In other words, we could keep our plans in perpetuity regardless of whether they met the benefit mandates and other standards under the new law.

Then the Department of Labor issued the regulations for maintaining grandfather status that were nearly impossible to avoid violating. For example, a plan would lose its grandfather status if a co-pay for a certain service increased by $10 in one year; or if the coinsurance for a procedure increased from 15 percent to 16 percent; or if the deductible rose from $1,000 to $1,200. If the intent of the Dept. of Labor was to force most people to lose their health plans, they couldn’t have done much better.

Exactly how many people with small-group insurance will be receiving cancellation letters is not known. However, when the Department of Labor released its grandfather regulations it noted that “approximately 66 percent of small employers… made a change in either cost sharing or premium contribution during 2009 that would have caused them to relinquish grandfather status if the same change were made in 2011.” There are about 31 million employees working for firms with less than 50 workers who get insurance from their employer. If the Department of Labor’s estimates prove correct, over 20 million of them could receive a cancellation notice.

Yet, there are other reasons why this might not make a big media splash.

A spokesman for BCBSND said that about 17,000 letters will be sent out to its small-group customers. He estimated that about half have been sent so far. The reason is that many small-group renewals for BCBSND occur on January 1 of each year. If that is the case for the small-group market in general, then many of the cancellation letters were already sent out late last year. The media may have missed the story because of the focus on the individual policy cancellations.

So far WTAE, a local TV station in Pittsburgh, has done one of the few stories on small-group policy cancellations. You can see the impact Obamacare had on Simonetta’s Collision and Repair Center here.

Beyond that, there has been very little media coverage. Thus, people who have their small-group policies canceled due to Obamacare may not receive the media attention that their counterparts in the individual market got late last year. Here’s betting, though, that they’ll be no less angry come November.

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David Hogberg is a senior fellow at the National Center for Public Policy Research.  Follow David Hogberg on Twitter.