President Barack Obama's misleading promises that nobody would lose their current coverage, which he continued to make throughout the 2012 election campaign, certainly created a perception that this was an unforeseen consequence of the federal healthcare law.
But previous research on the characteristics of the individual insurance market showed that some level of cancellations was inevitable. Most notably, a 2012 study published in Health Affairs found that more than half of health plans sold in the individual market in 2010 did not meet the requirements of the ACA.
The study found that while plans sold in the group market had an average actuarial value of 83%—meaning they covered on average 83% of the policyholder's medical costs—products sold in the individual marketplace had an average actuarial value of 60%. Under the ACA, the least-comprehensive plans sold through the insurance exchanges, the bronze-tier plans, must have an actuarial rating of at least 60%. Just over half of the individual plans sold in 2010 did not meet that threshold.
Jon Gabel, a senior fellow with NORC at the University of Chicago and the lead author of the study, said the precise impact on the new ACA rules on the individual market were difficult to predict back then because plans that were in existence at the time that the healthcare law could be “grandfathered” in as acceptable.
“I certainly expected it to happen,” Gabel said of the cancellations. “What I didn't expect is the magnitude.”
But Gabel argues that no one should mourn the cancellation of many of the current individual plans because they offered skimpy and often-illusory coverage. “When I look at the old individual market, the two words that come to mind are market failure,” he said.
Given that reality, Gabel is surprised at the level of blowback the cancellations have generated. “I think the media and the opponents of the ACA have gone over the edge a little bit in their criticism,” he said.
Follow Paul Demko on Twitter: @MHpdemko
