President Obama was at pains Thursday to portray the mass cancellation of insurance plans triggered by the Affordable Care Act as an unintended and unforeseen consequence of the law.

But in fact, the cancellation of millions of policies is precisely what the law was designed to do. The administration is only feigning ignorance now because the political price is proving too high.


One of the fundamental goals of Obamacare was to ensure that every health insurance plan in the country included certain minimum benefits like prescription drug coverage and routine physician visits. That meant millions of pre-Obamacare plans, especially those on the individual market that did not meet the new requirements, would become illegal.

Insurance companies acted accordingly and began informing their customers this fall that their plans did not comply with the new health care law. So far, about five million Americans have been kicked off their current health insurance—which means the law has been working as planned.

It is impossible that the Obama administration did not know this would happen when they passed the law. After January 1, 2014, insurers face penalties of up to $100 per day per person enrolled in a non-compliant plan. For large carriers, those fines could quickly add up to millions of dollars in penalties.

Once the cancellation letters started rolling in, the president’s oft-repeated pledge that, “if you like your plan, you can keep it,” quickly became a political liability. That’s the real reason the Obama administration is offering a “fix” to a part of the law that isn’t broken.

The president’s press conference last week was in fact a desperate attempt to outflank members of his own party who are beginning to break ranks. Sen. Mary LandrieuMary Loretta LandrieuCassidy wins reelection in Louisiana Bottom line A decade of making a difference: Senate Caucus on Foster Youth MORE (D-La.), who faces reelection in 2014, said she will continue to work on legislation to allow people to keep their insurance plans despite the administration’s administrative fix. Landrieu’s proposal has so far attracted support from a handful of other Senate Democrats, several of whom also face reelection.

Outrage over the president’s false claim about “keeping your plan” has been hard for him to shake, despite his half-hearted efforts to apologize. Pressed about it on Thursday, the president said, “the way I put that forward unequivocally ended up not being accurate.”

But the problem is not the way he put it forward; the problem was the substance of what he said was simply not true, and it strains credulity to claim otherwise. Specifically, the president said he thought 98 percent of those purchasing coverage on the individual market would be “pleasantly surprised” or that their plans would not change at all, and that the law’s grandfather clause would cover the rest.

The grandfather clause was ostensibly included in the ACA so people could keep their plans if they liked them. But subsequent regulation from the Obama administration interpreted that provision so narrowly that it was rendered meaningless. One of the president’s most remarkable admissions Thursday was that, “the problem with the grandfather clause that we put in place is it’s almost like we said to folks you’ve got to buy a new car even if you can’t afford it right now.”

Trouble is, the administration knew that’s what they were saying all along. Back in 2010, the Congressional Budget Office reported that 40 to 67 percent of the 25 million Americans in the individual insurance market would lose their grandfather status in 2013 because of a high turnover rate in this market and because such plans tend to change more often than employer-based plans. This was plainly written on page 34,553 of the Federal Register, so it shouldn’t have been a surprise to Obama or his advisors when insurers began sending out cancellation notices this year.

What the president proposed Thursday is merely a delay of these disastrous—yet intentional— consequences one year down the road, past the 2014 midterm elections.

Instead of trying to patch up a fundamentally flawed law whose deleterious effects are now obvious, the Obamacare should be repealed and replaced with reforms that give Americans real health care choices. We don’t need an administrative “fix” but an entirely new approach to health care reform—one that doesn’t outlaw the coverage millions of Americans chose for themselves and their families.

Reform that actually lowers costs and gives Americans more control over their health insurance might just be popular enough that our elected officials wouldn’t have to pretend they don’t understand it.

Davidson is a policy analyst for the Center for Health Care Policy with the Texas Public Policy Foundation, a non-profit, free-market research institute based in Austin. He may be reached at Wohlgemuth is executive director and director for the Center for Health Care Policy with the Texas Public Policy Foundation. She may be reached at