A Project of The Annenberg Public Policy Center

Private Insurance Not Outlawed


Q: Will the House’s proposed health care plan outlaw private insurance?

A: No. Those who are claiming that the plan would get rid of private insurance or make it illegal are misinterpreting the bill.

FULL QUESTION

President Obama claims that we will be able to keep our current private health care insurance, but I have heard that on page 16 of the health insurance initiative that after one year private health insurance providers will no longer be able to accept new individual policy holders. Where does this leave me if I need to change insurance companies after the first year? The president insinuates that there are no restrictions on having an individual policy. Is this true? 

FULL ANSWER

It’s nonsense to say that private insurance will be outlawed, but it will be regulated. In fact, the bill envisions a wide variety of private policies being offered to the public through a new national health insurance exchange resembling the Federal Employee Health Benefits plan, which makes 269 different private plans in total available to federal workers, including members of Congress.

What page 16 actually says is that those who like their current policies are "grandfathered" and can keep them, even if the policies don’t meet new standards.

The false idea that H.R. 3200 would prohibit insurance companies from accepting new policyholders stems from the conservative Investors’ Business Daily, which made the claim in a July editorial:

Investor’s Business Daily, July 15: It didn’t take long to run into an "uh-oh" moment when reading the House’s "health care for all Americans" bill. Right there on Page 16 is a provision making individual private medical insurance illegal. … The provision would indeed outlaw individual private coverage. Under the Orwellian header of "Protecting The Choice To Keep Current Coverage," the "Limitation On New Enrollment" section of the bill clearly states:

"Except as provided in this paragraph, the individual health insurance issuer offering such coverage does not enroll any individual in such coverage if the first effective date of coverage is on or after the first day" of the year the legislation becomes law.

So we can all keep our coverage, just as promised – with, of course, exceptions: Those who currently have private individual coverage won’t be able to change it. Nor will those who leave a company to work for themselves be free to buy individual plans from private carriers.

Here, however, is the paragraph immediately preceding IBD’s quote:

H.R. 3200: Subject to the succeeding provisions of this section, for purposes of establishing acceptable coverage under this division, the term “grandfathered health insurance coverage” means individual health insurance coverage that is offered and in force and effect before the first day of Y1 if the following conditions are met.

In other words, the quote IBD references is part of the definition of “grandfathered” health insurance coverage. That quote doesn’t say that insurers can’t take on new enrollees; it says that if they do, that won’t be considered grandfathered coverage. In other words, any new individual policies would have to meet minimum standards and be offered through the new health insurance exchange.

The proposed health care model would indeed encourage individuals not already covered by employer-provided health policies to buy coverage through the nationwide insurance exchange. The choices would include a range of private plans meeting the new standards, as well as a new federal plan, as the House bill is currently written. People with individually purchased insurance who wish (or need) to change their grandfathered plans will have to purchase insurance through the exchange. If an individual would rather keep his plan, he can do so for as long as the insurance company keeps offering it. At any rate, nobody will be forced into the federal health insurance option – they’ll have their pick of private ones.

In fact, some say the biggest change will be that individual insurance gets better. "In a lot of ways it would improve options for people buying coverage on the individual market right now," said Sara Collins, vice president of the Commonwealth Fund, a nonpartisan organization that supports “a high performing health care system." The exchange plans would not be underwritten, and would be required to provide a minimum level of service to everybody. There would also be subsidies available for individuals and small employers to offset the cost of purchasing insurance through the exchange.

IBD won’t admit that it misread page 16, but says "we’re standing by our story," which it now attempts to justify this way:

IBD, July 21: But the exchange will not be a private market. It will be a program in which Americans can buy individual plans from private companies in competition with the "public option" provision of the bill that will provide taxpayer-subsidized coverage.

But whether or not one considers the insurance exchange to be a "private market," the fact is what is sold in that market would include a variety of plans sold by private insurance companies. So IBD’s original claim that the bill would make "individual private medical insurance illegal" is wrong.

– Jess Henig

Sources

U.S. House. "H.R. 3200." (as introduced 14 Jul 2009.)

Collins, Sara. Interview with FactCheck.org. 21 Jul 2009.

"It’s Not an Option." Editorial. Investors Business Daily 15 Jul 2009.

"Still Not an Option." Editorial. Investors Business Daily 21 Jul 2009.