PolitiFact: Health care law’s standards make survival hard for ‘grandfathered’ plans

“The (health care) law does not demand that all of these cancellations go out.”

House Minority Leader Nancy Pelosi during an interview Sunday on NBC’s “Meet the Press”

President Barack Obama’s apology and administrative pivot to stop a wave of insurance plan cancellations has hardly quieted accusations that he misled millions of Americans when he said “If you like your plan, you can keep it.”

Facing these criticisms, the Democratic leadership has rallied around the president. House Minority Leader Nancy Pelosi, D-Calif., said he actually took more blame for what happened than he might deserve.

“The law does not demand that all of these cancellations go out,” Pelosi said on NBC’s “Meet the Press.”

We have looked at variations of this claim before, most recently when former Obama adviser Ezekiel Emanuel said, “The insurance companies are making that choice (to cancel or change policies), not the president.” Our conclusions remain the same. While there’s an element of truth to the statement, it ignores the ways that the Affordable Care Act pushes insurance companies to change the plans they offer.

The Affordable Care Act sets certain standards for the services pretty much every plan must cover. There are 10 “essential health benefits,” including emergency services, maternity care and mental health care.

If policyholders bought plans before Obama signed the law into effect March 23, 2010, they’re considered “grandfathered.” They can keep their plans as long as those plans don’t change much.

We don’t have good information on how many cancellation notices are for plans that could continue if the insurance company wanted. But we do know two things.

First, it doesn’t take much for a plan to lose its grandfathered status. An increase in a co-pay of $5 plus the rate of medical inflation could tip a plan over the edge.

Second, once a plan is about to lose its grandfathered status, it’s on the road to oblivion. The Health Insurance Portability and Accountability Act of 1996, known as HIPAA, says that if an insurer wants to end a policy, it needs to give policyholders 90 days’ notice as well as information about alternative coverage plans that insurer is offering. That’s essentially the message many individual-market policyholders have been getting in the mail these days.

Pelosi’s spokesman, Drew Hammill, told PolitiFact that insurance companies have options.

“Except for these ‘grandfathered plans,’ health insurers in the individual market have to adopt new consumer protections,” Hammill said. “In some instances, insurers are doing this by canceling current plans rather than simply upgrading them. Nothing in the law requires the cancellation of plans.”

Some health policy experts told us that yes, in a technical sense, insurers are pulling the plug on these grandfathered policies. Timothy Jost, a Washington and Lee University law professor, said that “if a grandfathered plan is being terminated, it is the insurer’s decision — nothing in the law requires it.”

But other experts said that while this is technically true, it gives a distorted view of what’s going on.

The law places grandfathered plans in such a straitjacket — unable to attract new individual policyholders and unable to adjust terms to market conditions — that it’s only a matter of time before companies are driven to pull the plug. To ignore the government’s role in establishing the parameters for this highly regulated and highly competitive industry, they say, is substantially misleading.