Why You Are Likely To Lose Your Health Insurance

Photo Credit: Mercatus

One of Barack Obama's best-remembered promises was, 'If you like your health insurance, you can keep it.' But at the very same time the president was making that promise, lawmakers on Capitol Hill were drafting legislation that would make sure that promise could never be kept.

We call it Obamacare.

Moreover, the problem is not only that millions of people were unable to keep the plan they had in 2010, when the health reform law was passed. They are not likely to be able to keep for long any plan they have selected this year on a health insurance exchange. As we go forward, all health plans will be subjected to restrictions that are likely to change every year. So a plan that meets the Obamacare restriction this year, may not meet the restriction next year or the year after that.

In fact the idea of long-lasting portable insurance - that allows you to keep your doctor and form a long lasting relationship with medical providers - was completely squashed when Congress passed Obamacare.

Take a look at the chart below. It reflects the fact that all commercial health insurance must fit within four metallic bands: Bronze, Silver, Gold and Platinum. Each band is defined by its 'actuarial value' - which is the percent of covered benefits the plan is expected to pay. For example, a Bronze plan is expected to pay between 58% and 62% of health care costs for a representative enrollee. A Silver plan is expected to pay between 68% and 72%. And so forth.

Now here is what is really strange and it is explained superbly by Bob Graboyes, a health economist with the Mercatus Center, in this video. There are gaps between the corridors. And if your plan happens to fall within one of the gaps, it is no longer a valid plan.

Suppose you are in a Bronze plan with an actuarial value of 58%. Then, a year from now, because of price changes, technology changes, or some other kind of change, your plan suddenly covers 60% of expected expenses. That's good for you, right? Wrong. Because your plan no longer fits into one of the metallic corridors, it's no longer a valid plan - despite the fact that it has become a better plan!

Now let's suppose you have a really good plan - a plan that pays 98% of expected health care costs. Given the large number of Democrat's who believe that health insurance should pay almost every medical bill, you would think that the law passed by a Democratic Congress without a single Republican vote would strongly encourage such a plan. If you're inclined to think that, you are mistaken, however.

Any plan that pays more than 92% of expected health care costs for the average enrollee is illegal under Obamacare.

Sometimes truth is stranger than fiction.