ObamaCare may force 1 million to lose health coverage this fall

Politico has some bad news for part-time and low-income workers:

Part of the health care overhaul due to kick in this September could strip more than 1 million people of their insurance coverage, violating a key goal of President Barack Obama’s reforms.

Under the provision, insurance companies will no longer be able to apply broad annual caps on the amount of money they pay out on health policies. Employer groups say the ban could essentially wipe out a niche insurance market that many part-time workers and retail and restaurant employees have come to rely on.

This market’s limited-benefit plans, also called mini-med plans, are priced low because they can, among other things, restrict the number of covered doctor visits or impose a maximum on insurance payouts in a year. The plans are commonly offered by retail or restaurant companies to low-wage workers who cannot afford more expensive, comprehensive coverage.

Depending on how strictly the administration implements the provision, the ban could in effect outlaw the plans or make them so restrictive that insurance companies would raise rates to the point they become unaffordable.

It is clear that the Democrats intended to do away with these low-cost, inferior (i.e. affordable) plans, but they may have overlooked the consequences of their ill-considered timeline.  Ed Morrissey explains:

This is entirely deliberate, although Congress apparently never considered the timing. Barack Obama and Pelosi continually harped about the “underinsured,” and the mini-med plans are what they had in mind. They wanted to put an end to such cost-efficient plans and force employers to either provide comprehensive insurance or kick their employees into the state-run exchanges, where the newly-uninsured would get welfare payments to buy their own plans in the individual market.

Democrats will get their wish — but the employees won’t get their coverage. The law imposes the penalties for mini-med plans in three months, but the exchanges won’t start until 2014. That means more than three years of having no insurance at all for low-income workers who previously had it, even if Obama and Pelosi sniffed at the worth of the plans.

Why did they impose the mandates first? This was part of the “front-load” strategy of the Democrats, who wanted to implement what they thought would be the most popular components of ObamaCare immediately, in order to build support for its continuance. Instead, the mandates will mean that mini-med plans will either cost so much that the employees can’t afford it, or more likely, the insurers will drop the plans as money-losers. It’s a big indicator that the people who drafted the law had very little understanding of the insurance industry, or of the private sector.

It’s also worth noting the irony of the timing. The mandates kick in in September, which is probably when the insurers will terminate the coverage. That means up to a million people will get the first-hand impact of ObamaCare just nine weeks before going to the polls in the midterm elections. That certainly qualifies as an unintended consequence.

The insurance industry is understandably fretful:

Millions of these plans are sold annually by insurance companies and by insurance agents, according to industry officials. Mini-med plans are in the limited-benefit health product category and are a cousin to critical illness policies, which pay benefits to insureds affected by certain specified medical conditions.

Under the healthcare reform legislation, health insurers cannot offer limited-benefit plans through state exchanges, and such plans do not qualify as offering "essential benefits."

Most states exempt limited-benefit health insurance products from conventional major medical plan mandates, and some insurers avoid state benefit mandates entirely by selling mini medical only to employers with more than 50 workers.

According to one industry official, this gives HHS the “regulatory latitude to completely destroy these plans, eliminating them from the marketplace, if they choose to say that the market reforms—no annual or lifetime limits—apply to mini-med plans.” (emphasis added)

This could be a double whammy for incumbent Democrats up for reelection in November.  The health care law touted to provide health coverage to millions of uninsured voters will force many to lose their health insurance nine weeks before the election.  It will also force many insurance companies to layoff workers or shutdown completely.