Obamacare: an insurance viewpoint

Commentary by Karl Ahlrichs

Let’s agree that insurance is tough to understand. Start with the fact that people in general don’t like the subject, and when we add politics to the mix we have a perfect storm.

Much of recent news coverage of Obamacare has been focused on election-year presidential promises that claimed everyone could keep their existing health insurance policy if they liked it.

Clearly, that wasn’t 100 percent correct. President Barack Obama should have said “most” instead of “all.” But he didn’t.

For a moment, please step outside the political echo chamber and into the health insurance strategy meetings that I am a part of. Let me share some of the larger picture that is guiding insurance policy.

First, let’s look at the size of the problem. The particular issue of policy cancellation affects less than four percent of Americans – those who buy individual health insurance directly, rather than the 80 percent who get it from their jobs or government programs, or the 15 percent who have no health insurance at all.

As an insurance professional, I know that some plans have always been risks – they’re cheap, but they offer poor coverage. People with this minimal insurance often think they are covered, then go bankrupt when their medical bills start piling up.

Not all the insurance plans being canceled are these minimal coverage plans. Some people really do like their plans, and they’re losing them because of new Obamacare rules. Why?

The law standardizes health plans by mandating a basic set of minimum essential benefits that some of today’s insurance products don’t cover. It also limits annual out-of-pocket expenses to $6,350 for a single person. Plans that do not reflect these changes are not allowed.

What if you get dropped? Shop around.

You may be able to get help paying for your insurance through Obamacare subsidies, which are available on a sliding scale through the federal marketplace to anyone who earns up to four times the federal poverty level or about $46,000 for a single person this year.

Frankly, I am not as upset by this issue as the media partisans are. Hearing that policies are to be discontinued is old news to those of us that work in health insurance. Insurance companies have always been quick to discontinue unprofitable plans, cancel coverage for insureds with excessive claims, change benefits or raise prices.

This is not very different.

This disruption is happening despite Obama saying, “If you like your plan, you can keep your plan.”

We insurance advisors always knew that this promise could never be kept. We knew that with the law getting rid of insurance with lesser benefits and weaker financial protections, that there would be some disappointed consumers.

While you may or may not agree with the changes, at their core the new rules follow basically sound risk management principles. Short term, it is uncomfortable for those who can’t get what they have always had. Long term, it may help.

There is a storm blowing through our world of health insurance, and some people will pay more and some will pay less. We will all be sharing the risk, and in the world of risk management, less is more.