The New Problem With Obamacare Isn't Socialism, It's Creative Destruction

Of course private insurers are dropping plans and changing coverage. The old plans weren't any good for patients anyway.
The president and vice president shared a moment after Obama signed the Affordable Care Act in 2010. (Larry Downing/Reuters)

The latest noisy controversy in the rollout of Obamacare is over millions of citizens being moved out of plans they purchased on the individual market. Even doggedly liberal commentators are attacking the administration for misleading these customers into thinking they could keep their exact same plans under Obamacare. But while the politics may be bad, the demise of these plans has been long expected as part of a wave of rationalization and creative destruction in the existing private-sector market.

In some cases, insurers are dropping policies because it is no longer profitable to offer them once they have to meet higher standards under the Affordable Care Act, such as accepting those with pre-existing conditions and actually covering outlays when people get sick. In other cases, as in Pennsylvania, it is the sickest people being dropped, as insurers get rid of their individual-market "guaranteed-issue" plans for people with pre-existing conditions now that all plans have to accept those who have them.

In all cases, there's been no move by the federal government specifically to help the 15 million people in the individual insurance market move into new plans that serve their needs and keep their costs low as new options become available through the state-based exchanges. Between 40 and 67 percent of the old individual-market plans are expected to be affected by the new rules, NBC reports. Meanwhile, insurers have been offering to auto-enroll customers in new plans that are much more expensive than the old ones, sparking outrage. So far more than 2 million people in the individual insurance market have received notices that they need to get or accept new plans over the course of 2014, according to CBS.

President Obama, while campaigning for the health-care overhaul in 2009, frequently said things like, "If you like your doctor or health care plan, you can keep it." Sometimes, since then, he's modified that statement to be, at times, a little more specific, and mention that he was talking about people who had insurance through their employers. The current version of the claim on the White House website is a model of confusion, speaking of "Americans who already have health insurance" and "the uninsured or those who don’t get their coverage through work"—which are in fact two very different categories of people.

A 2012 study by the Kaiser Family Foundation found that 6.6 percent of the 188.7 million non-elderly adults in America were in the individual insurance market and 21.4 percent were uninsured. Only 5.2 percent of those with incomes over $40,000 were in the individual insurance market (an important benchmark, since those with incomes in the mid-40s or higher aren't eligible for Obamacare subsidies); 78.3 percent with incomes that high were covered through the employer-based health insurance system. The major reason people were in the individual insurance market was that they were self-employed.

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Garance Franke-Ruta is a former senior editor covering national politics at The Atlantic.

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