Under Obamacare, if you like employer health plan, can you really 'keep it'?

Embroiled in controversy over the veracity of his pledge that if Americans like their existing health insurance they can keep it, President Obama has responded in the main by saying that the “vast majority” of health plans aren’t changing.

The White House argument is this: The employer-based plans that cover most working Americans (and 49 percent of the total population) are remaining in place, even as the Affordable Care Act moves toward full implementation.

So, if that’s true, then only a small slice of Americans – the 5 percent who buy coverage in the individual marketplace – are sometimes seeing big changes in their insurance.

But critics of the Obama administration say this isn’t the case. Employer-sponsored insurance is also changing at least in part because of Obamacare, some contend.

Sean Hackbarth, who writes a policy blog for the US Chamber of Commerce, says the Obama administration itself knew that employer-provided health plans would widely lose their "grandfathered" status and be subject to a range of Affordable Care Act provisions – just as happened with plans sold on the individual market.

In 2010, he points out, the administration estimated that 51 percent of employer plans would relinquish their grandfathered status by 2013.

Drawing on the same administration estimates, Avik Roy of the conservative Manhattan Institute wrote a commentary in Forbes last week under the headline: “Obama Officials In 2010: 93 Million Americans Will Be Unable To Keep Their Health Plans Under Obamacare.”

That’s 93 million who can’t keep their plans, out of some 181 million who have either employer-provided insurance or individual insurance in 2013, Mr. Roy argued.

Case closed?

Well, not so fast. Determining whether Mr. Obama is breaking his “you can keep it” pledge when it comes to employer plans involves more than tallying numbers of people who have or don’t have “grandfathered” health plans.

Yes, a lot of US health insurance plans are changing – for both employer-provided and individual coverage. But this evolution (and the resulting loss of grandfathered status under the law) isn’t all being forced by Obamacare.

In fact, there was a lot of evolution – and no guarantee of being able to “keep” one’s plan – in both employer and individual insurance marketplaces before the Affordable Care Act (ACA) came along.

According to journalists at the fact-checking website PolitiFact, the consulting firm Mercer found that “in each of the years from 2005 to 2008, roughly a quarter of companies said they made changes to their plans that would result in employees paying a greater share of the cost. In 2009 and 2010, it rose to one-third.”

In that context, the debate is partly a semantic one.

Arguably, Obama looks untruthful for appearing to promise repeatedly something he could never hope to deliver on – that the realm of insurance outside the sphere of his law would remain static, so that people could hang onto 2009 plans forever. But, on the other side of the debate, it may also be naive for anyone to take such an unrealistic promise so literally.

Still, with several million Americans likely to receive cancellation letters for their individual insurance policies, Obama's “you can keep it” phrasing is getting much greater scrutiny. Many of those people face a big jump in insurance costs, because the ACA demands that insurers cover a wider range of “essential” medical benefits.

Obama has been put on the defensive. He added a big caveat to his “keep it” pledge on Monday. Referring to plans on the individual market, the president said, “what we said was you could keep it if it hasn’t changed since the law was passed. So we wrote into the Affordable Care Act you’re grandfathered in on that plan.”

Because so many plans have in fact changed since 2010, millions of Americans do not have the choice of keeping the plans they had in 2009. On the employer side, only 36 percent of plans are grandfathered as of this year, according to the Kaiser Family Foundation, which tracks changes in health-care markets.

Some health policy experts, interpreting Obama's words less literally, say his “you can keep it” pledge is largely true when it comes to employer-provided plans.

Such plans may evolve from year to year, with benefit tweaks or changes in cost-sharing formulas – or an employer may swap one insurance company for another. But the typical employer plan won’t change much for next year.

“You probably can find a plan similar to what you had before,” says Gary Claxton of the Kaiser Family Foundation.

That said, Obamacare will affect employer-provided coverage over time – although experts differ over how big the changes will be. Some examples:

• The mandate that employers with 50 or more full-time workers must provide health coverage (or pay a penalty) could prod some of them to shift to a labor force that has more part-time workers, to avoid that requirement. There's at least some anecdotal evidence this is already happening. The employer mandate has been delayed, but is set to take effect in 2015.

Trader Joe’s recently announced that it would no longer offer health benefits for part-time workers, opting instead to let them shop for insurance on Obamacare exchanges. This change could yet end up as a better deal for most of those workers, Mr. Claxton says. That’s because Obamacare subsidies insurance for lower-income households, and Trader Joe’s will provide a health stipend to its part-time workers.

• As of 2018, per Obamacare, employers will face a new tax on “Cadillac” health plans. That could nudge employers to scale back the generosity of their plans and to shift more costs to employees.

• The ACA could cause employers to shift more rapidly toward so-called private exchanges. These marketplaces are distinct from the public exchanges mandated by Obamacare, but both are venues where people shop online from a portfolio of health plans. Paul Howard of the Manhattan Institute has recently argued that the health-reform law is serving to promote the insurance-exchange concept. It’s hard to separate, though, how much the shift is being fueled by Obamacare and how much by broader pressures on employers to manage health costs.

• Obamacare places some new requirements on employer-provided health plans. The rules don’t necessarily mean big changes for employer plans. (Large employers don’t have to offer the same package of “essential benefits” that insurers must offer to individuals in the Obamacare exchanges.) But, for instance, in 2014 employers face a cap on the share of the cost that employees pick up for their insurance plan, so that an employee's “maximum out-of-pocket” expense would be $6,350 for the year, or $12,700 per family. That cap applies only to plans that aren't grandfathered.