Obamacare: When canceled health insurance leads to a better policy

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Covering California series icon 2013

Much of the recent public debate over the Affordable Care Act has been dominated recently by stories about the millions of people getting their health insurance canceled because it doesn’t comply with the terms of the federal law.

President Obama’s call to extend those policies for another year has met with resistance in California and elsewhere. But the story is more complex than canceled policies and higher premiums: A number of those losing their policies are finding something better.

Barbara Neff, 46, of Santa Monica is a self-employed writer. She’s one of the roughly one million Californians who recently got word from their health insurance company that their coverage would be canceled at the end of next month. 

She’s also among those who make too much money to receive subsidies under the Affordable Care Act. But for Neff, receiving a policy cancellation has brought relief. 

First of all, she’s not satisfied with her current policy.

"The deductible has ranged anywhere from $3,000 to as high as $5,000," she said, "which means I have to spend that much each year before the insurance even kicks in." 

RELATED60,000 Californians have chosen an Obamacare health plan so far

Neff said that she was stuck with her old plan because a preexisting condition kept her from switching to a more affordable policy.

"I did at one point try to get a policy through my grad school after I graduated as part of an alumni plan," she said, adding that she was rejected "because I’d had a bout of sciatica five years previously that had never returned."

But as of Jan. 1, 2014, the federal health law prohibits insurers from denying coverage or charging more for preexisting problems. And that’s opened an array of affordable options for Neff, who is now  enrolled in a new, $2,000 deductible plan through Covered California, the state-run health insurance marketplace.

Neff's  premium will go up under the new policy – by  $24 a month. But under the federal law, she'll no longer have to pay for preventive care and that, she said, will bring significant savings that will more than make up for the additional premium cost. 

"I’ve been paying for my mammograms out of pocket and that’s $400-$450 per year," she said. "And that type of care is 100 percent covered under this new policy."

Huge deductibles have been the norm for Tim Wilsbach,40,  a TV editor who lives in Culver City with his family. Like Neff, Wilsbach also makes too much to qualify for federal subsidies, so when he received his cancellation notice a few weeks ago, he was worried.

Two plans for one family

Wilsbach has two plans for his family. The one being canceled is a bare bones policy he has for himself and his 4-year-old son. With its $11,000 deductible, it is "not a great policy," said Wilsbach. With such a high deductible, the plan "didn't cover anything," he added. 

Wilsbach says because he and his wife are planning on a second baby, they put her on a separate policy with better coverage. Still, her deductible is high at $5,000.

After getting the cancellation notice, Wilsbach started shopping on the Covered California website. He says he was pleasantly surprised to find  a plan for the entire family that not only offers broader coverage and a much lower $4,000 deductible, but also has a monthly premium that is nearly $100 less than what they pay now. 

"Just looking through what the plan covers versus what used to be covered, yeah, I’m quite happy about it," said Wilsbach.

Jane Bradford of Pasadena is a stay-at-home mom who’s losing the HMO insurance she has for herself and her three kids. Her policy offers low co-pays for doctor visits and a relatively low $3,000 family deductible, but she’ll shed no tears to see it go.  Bradford says that’s because she’s found several plans that will cost as much as $400 less in monthly premiums – even though her husband’s income is too high to qualify for a federal subsidy.

That level of savings is "awesome," said Bradford. 

None of this comes as a surprise to Micah Weinberg, a senior researcher at the Bay Area Council Economic Institute in San Francisco.

"A lot of the anecdotes about people having policies canceled and gigantic increases are real," he said.  "But they are not representative of what’s happening more broadly in the marketplace."

Weinberg predicts many people who are losing their policies will come out ahead -  even if their premiums go up -  because of lower deductibles, full coverage of preventive care and no penalties for preexisting conditions. 

And, he adds, insurance will almost certainly be cheaper for the 2.6 million people in California who qualify for subsidies - which is another chapter of the Obamacare story that bears repeating.

Families USA released a survey on Nov. 21 finding that about 264,000 people — roughly 12 percent of Californians under 65 with individual health insurance — are at risk of having to buy a new plan without any federal financial assistance.

The survey, based on analyses of U.S. Census data, found that 2.2 million Californians under 65 have health insurance on the individual market (6.7 percent of the state's under 65 population). It found that 68 percent of that group — about 1.5 million people — is eligible for federal subsidies or the expanded Medi-Cal program because they make 400 percent or less of the Federal Poverty Level ($45,960 for an individual, $94,200 for a family of four). 

Families USA found that of the remaining 700,000 people in the individual market, about 38 percent — roughly 264,000 people — retain their coverage for more than a year and are thus at risk of having to buy new individual coverage without federal assistance. 

The survey findings for California tracked fairly closely to what Families USA found nationally. For the entire country, the survey found that 5.7 percent of Americans under 65 are in the individual insurance market – 15.2 million people.

Of that group, the survey found that 71 percent are eligible for federal subsidies or Medicaid. Of the remaining 29 percent of those under 65 in the individual market, the survey found that 1.6 million people – 0.6 percent of all Americans under 65 – retain ongoing individual coverage for more than a year and are thus at risk of having to buy new individual coverage without federal subsidies. 

The Families USA report was based on analyses of U.S. Census data conducted by the Urban Institute, the Kaiser Family Foundation’s Kaiser Commission on Medicaid and the Uninsured, and the University of Minnesota’s State Health Access Data Assistance Center.

This story was updated at 11:32 a.m. on Nov. 21.

An earlier version of this story incorrectly stated the percentage relating to the proportion of Californians at risk of having to buy a new plan without federal assistance. KPCC regrets the error.

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