Health Insurance Plans Cancelled; Unintended Side Effect of Affordable Care Act

An unintended side effect of the Affordable Care Act seems to be the cancellation of some individual health insurance plans by insurers.  Business Insider’s Josh Barro gives the main reasons in “Here’s Why So Many Americans Are Getting Letters Saying Their Health Insurance Is Canceled.”  There are 14 million Americans who have health insurance individually, either by choice of because they don’t have the option of employer sponsored insurance coverage.  President Obama told those Americans that they would not have to make any changes when the Affordable Care Act went into law.  While he likely believed that to be the case, Kaiser Health News has found that many insurance companies are sending cancellation notices to those people that their plans cover.  People are being forced to change plans for a couple different reasons.

Many health insurance plans don’t meet the new standards required by the health insurance laws.  All plans have to include coverage of 10 essential health benefits, have specific individual and family limits on out of pocket costs, and insurers have to pay a certain percentage of the costs their participants charge.  Plans that don’t meet the requirements will be cancelled and you’ll have to get a plan that does meet these new requirements.  Those plans will cost more, so make sure to see if you qualify for a government subsidy.  The other big grouping of plans likely to be cancelled are those with a large number of particularly high risk insureds.  Plans like that cost a lot of money, but now that there will be more choices for people with pre-existing conditions, the plans could be more affordable through exchanges than they have been outside of them.

Some have questioned why individual plans will even exist outside of the health insurance exchanges once the entire law is in effect since subsidies are only available through exchange plans and the laws are mostly the same.  One reason is that not everyone qualifies for a subsidy anyways, so they don’t necessarily need to shop in an insurance exchange.  There are some plans being grandfathered in that won’t have to follow all of the stipulations of the Affordable Care Act.  Those plans offered before March 2010 will likely be more affordable and will only be available outside of the exchanges.  Since the Healthcare.gov exchange websites have had some hiccups thus far, if you aren’t looking for a specific plan offered or a subsidy, you don’t have to worry about using that website and can shop outside of exchanges.

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