Myth: Before Obamacare, there were routine plan cancelations in the individual market.
Many Obamacare defenders blame the discontinued policies on “bad apple insurers,” claiming that it was typical in this market to have plan cancellations and that they are not a result of Obamacare.
For instance, former Obama Administration official Van Jones called the individual marketplace a “‘wild, wild west’ where people were denied coverage for pre-existing conditions and policyholders were continually dropped by insurers offering thin, sketchy coverage.” In addition, President Obama said, “Before the Affordable Care Act, the worst of these plans routinely dropped thousands of Americans every single year.”
But since the enactment of the Health Insurance Portability and Accountability Act of 1996 (HIPAA), insurers have been broadly prohibited from canceling or refusing to renew coverage. One of the few exceptions to that prohibition is if an insurer discontinues a particular plan or type of coverage. In such cases, the insurer must provide the affected individuals the option to enroll in any other applicable coverage that the insurer offers.
That is largely what happened with the 4.7 million plan cancelations that were reported at the end of 2013. The insurers were discontinuing their pre-Obamacare plans and offering policyholders replacement coverage that complied with Obamacare’s wide variety of new mandates and regulations.