Friday, November 22, 2013

President Obama's "If You Like Your Plan, You Can Keep Your Plan" Statement Is 99% True

For weeks, the media's reporting has been focused on two aspects of Obamacare's Individual Exchange Roll-Out.  The first is the website and its flaws; this is a story that deserves attention, though it would be nice to hear about the improvements as well. The other main narrative has been Obama's promise that everyone could keep their plan if they liked their plan and the reality of insurance cancellations that have gone out to millions of people.  

Now, while reasonable people can agree that Obama's statement was at the very least misleading, the real question is not how many people are being cancelled but rather how many people is this situation really affecting negatively?  It's understandable that anyone receiving a cancellation notice is scared, but that doesn't mean they won't be better off for it.  

So, let's run through some rough numbers.

Most people in the US have insurance through their employer, medicare, or medicaid.  Those people are untouched.  Thry represents over 90% of people who are currently insured in some fashion.  Roughly 12-16 million people are in the individual or "non-group" market.  That's less than 10% of the total insured market and roughly 4-5% of the US population.

Among the 12-16 million people, around 5 million people have received these cancellation letters.  Let's say that in total it will be between 5 and 7 million people who are affected.  Maybe it's a bit higher, but we don't know just yet.  That's about 1.5%-2.25% of the population and much less of the insured population.

Okay, so while that's a small percentage, that's still a large number of people.  But is it true that all of these people being cancelled are worse off?  Not really.  For one, many of these people will now receive subsidies on the marketplace.  For another, some of them will actually qualify for medicaid if their state is expanding the program.  Additionally, their package of benefits will improve and may be at no or little extra cost. But it's hard to determine exactly how many within this group represent the above situations.

Let's see if we can figure out a rough estimate about how many people are adversely affected another way.

I am going to be using Jonathon's Cohn's excellent article about Obamacare cancellation myths for my data.

As Cohn points out:
According to one Health Affairs study, half of the people in the non-group market stay in it for less than half a year, two-thirds stay in for less than a year, and four in five stay less than two years. Put another way, less than 20 percent of people in the non-group market hold onto their policies for more than two years.
So, we can definitively state that those holding onto their insurance for under 6 months are not actually adversely affected by the cancellations long term (they were leaving the market soon, anyway).  And we should extend this to anyone who stays for less than a year which is roughly 2/3 of the market (we could extend this out 2 years, but for the sake of argument let's stick to 1).  These are likely people who lost their job or are enterring the market (ie college grads) and thus buy their own insurance until they find a job, which would explain the short time frame.

This leaves us which just 1/3 of the non-group market potentially affected negatively.  Let's assume the cancellations are spread evenly across these people regardless of how long they hold onto insurance.  This is probably a poor assumption as I imagine those with long term non-group coverage probably pay for better coverage that is not being cancelled (ie self employed) whereas the lesser plans are being sold to short-term holders; for the sake of argument we will keep this evenly distributed.  We are now at 1.67 to 2.33 million non-group policy holders or roughly 0.5-0.75% of the US population (which again, is probably an overestimation).

Can we whittle this group down even more?

Well, let's go back to Cohn's article:

The best survey on this subject I’ve seen comes from the Center for Health Research and Transformation. In it, nearly half of all people surveyed rated their non-group coverage “fair or poor.” The proportion of respondents who had the same thing to say about employer coverage, Medicare, or Medicaid was half as high. This isn't particularly surprising, given that the most egregious insurance company abuses—rescinding policies for people who get sick, failing to pay for services that beneficiaries assumed were covered—usually come from the non-group market. 
Nearly half of non-group policy holders rate their coverage as "fair" or "poor."  In other words, they don't think highly of it and they wouldn't be opposed to buying better coverage like those in the group market (or employer coverage) receive despite often paying a higher cost.  In that same study, over 60% said they had a "negative experience."

Again, for the sake of uniformity, we will assume that those who rate their coverage as "fair" or "poor" are equally as likely to be in either group of short-term or long-term non-group policy holders.  That leaves us with 900k to 1.3 million (0.2-0.4% of US population) non-group policy holders who may be adversely affected by the cancellation notices.  Everyone else either weren't staying on their coverage regardless or didn't like their coverage to begin with.

Can we keep going?  We probably could.  Certainly, some of those people would qualify for subsidies that reduce their cost or even possibly go on medicaid.  However, I'd suspect that number among this group is very small as people who keep long term non-group policies they like are probably affluent and thus that number would be statistically insignificant.  That is not to say that some of these people wouldn't like their coverage off the exchanges more, though a significant amount of them will also not be able to afford coverage as they won't qualify for subsidies.

Still, that 900k-1.3 million people who are adversely affected by the cancellation notices represent less than 10% of the current non-group market, less than 1% of the overall Health Insurance market, and less than 0.5% of the US population.  Many of these people are affluent and thus having to pay more won't do much to their overall budget.  Those that aren't are getting screwed but its clearly a small number of people and if there is a "fix" it's that these people should get subsidized insurance!

What all this means is that means that 99% of the currently insured market can keep their plan if they like it.  Most of those won't receive cancellation notices and the overwhelming majority of those that do don't want to keep their plan!

So when President Obama told people "if you like your plan, you can keep your plan," he wasn't being completely accurate.  But he was over 99% accurate, which in today's political world is about as common as as a unicorn.

It's about time the media starts focusing on the millions of people The Affordable Car Act is in the process of helping, whether through the exchanges or medicaid expansions, than the relatively few people being adversely affected by policy cancellations.

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