In 2010, Administration Predicted ‘Majority’ of Employer-Based Health Plans Would Disappear

The Obama administration has repeatedly said that the health-insurance-plan cancellations receiving so much attention in the news in recent days will affect only the 5 percent of Americans who purchase insurance on the individual market. The Department of Justice, however, in a brief filed in federal court last month, conceded that the number may be much higher. According to the administration’s numbers, nearly 80 million additional Americans, “a majority” of those on employer-sponsored health plans, may also be out of luck. 

“It is projected that more group health plans will transition to the requirements under the regulations as time goes on,” DOJ lawyers wrote in response to court challenge to the law’s requirement that insurance plans provide coverage of contraception. “Defendants have estimated that a majority of group health plans will have lost their grandfather status by the end 2013.”

The DOJ cites the June 17, 2010, edition of the Federal Register, which acknowledges that within the first year of Obamacare’s employer mandate, the insurance plans offered by many employers will be canceled because their policies will not be grandfathered under the administration’s regulations. ”The Departments’ mid-range estimate is that 66 percent of small-employer plans and 45 percent of large-employer plans will relinquish their grandfather status by the end of 2013,” the Register says. “The low-end estimates are for 49 percent and 34 percent of small and large-employer plans, respectively, to have relinquished grandfather status, and the high-end estimates are 80 percent and 64 percent, respectively.”

The DOJ’s admission suggests the president’s promise that if you like your plan, you can keep it may ring hollow for far more Americans than the administration has let on. But since individuals who lose their plans are required by the individual mandate to go on the market and replace their canceled plans, sometimes at a higher cost, employers will do the work of replacing  employer-based plans that lose grandfathered status. As a result, the disruption caused by the cancelation of employer-based plans, is unlikely to match the uproar from those who shop on the individual market.