If you like your health plan, President Barack Obama said repeatedly and emphatically, you will be able to keep it.
It was a perfect sound bite as he extolled the benefits of health care reform, and it held true for most people — but not everyone.
A small percentage of Americans — particularly those who get health insurance on their own, rather than through their employer — are now learning that the Affordable Care Act requires them to buy new health plans that provide additional benefits at a higher cost.
The situation was well-known all along, at least in the insurance industry and in health policy circles.
"It was an inevitable shoe that was going to drop," said Tom Miller, a resident fellow at the American Enterprise Institute, a policy research organization. "That doesn't mean that it was widely understood or perceived.
"Things are only real to people when they happen — when they get a letter in the mailbox."
That is beginning to happen.
WPS Health Insurance in Madison, for instance, is starting to send cancellation notices to 9,000 customers who are not in so-called "grandfathered" plans exempt from the new regulations or who have not opted to renew their existing health plan early.
Those customers have the option of buying new plans with WPS or one of its competitors.
About 180,000 people in Wisconsin who buy insurance on their own, as opposed to getting coverage through an employer, eventually could be in the same situation.
For now, many are being given the option of renewing their existing policies early, keeping them in effect through most of next year. Some insurers are avoiding using the word cancel altogether.
Golden Rule Insurance Co., part of UnitedHealth Group Inc., is "not canceling coverage for any of our customers who have our individual and family health plans in Wisconsin," Ellen Laden, a company spokeswoman, said in an email.
In a letter to customers, the company said they can keep their existing plans, giving them additional time to understand how the Affordable Care Act will work.
Array of new regulations
The Affordable Care Act, commonly known as "Obamacare," imposes an array of new regulations on the market for health insurance sold directly to individuals and families.
"The entire individual insurance market is being changed," said William Custer, an associate professor and director of the Center for Health Services Research at Georgia State University.
The new requirements include:
■Health plans must provide a package of essential benefits, including preventive care, maternity care and mental health coverage.
■Out-of-pocket expenses, such as deductibles and co-pays, are capped.
■Health insurers are barred from charging women higher rates than men.
■Annual and lifetime caps on benefits are eliminated.
"One of the purposes of the Affordable Care Act was to try to improve the quality of insurance that people buy," said Henry Aaron, a senior fellow at the Brookings Institution.
Estimates on the size of the individual market nationally vary widely. A common estimate is 15 million, but the U.S. Census Bureau puts it at 19.4 million people.
An estimated 156 million people, in contrast, get health insurance through an employer. For them, the only changes they will notice next year are those made by their employer.
How many people in the individual market will be significantly affected by the changes is a question.
Anthem Blue Cross and Blue Shield and Humana, two of the biggest health insurers in the Milwaukee market, did not respond to requests for information on how many of their customers' plans were being modified or canceled.
Subsidies lower cost
Some people who buy health insurance on their own could come out ahead.
For example, they may have health plans that would not meet the new requirements, such as plans with very high deductibles or limited benefits, because that is all they can afford. Under the new rules, they may be eligible for subsidies, in the form of tax credits, that will lower the cost of their plan, and their coverage will be better.
The subsidies drop sharply, though, for people with household incomes above 250% of the federal poverty threshold, or $28,725 for one person and $58,575 for a family of four.
And without question, some people will be forced to buy more coverage, at a higher cost, than they now have or want. For instance, people who are healthy may have health plans with very high deductibles or limited benefits because they only want to insure against catastrophic medical expenses.
"There will be people who don't want to spend as much on coverage as the administration would like," said Miller of the American Enterprise Institute.
The higher premiums stem partly from the law's barring health insurers from denying coverage to people with pre-existing health problems or charging them higher rates.
Those practices produced "a situation in which those most in need of health care face the highest premiums — premiums frequently so high that they are virtually unaffordable," Aaron said.
Winners, losers
The new rules will produce winners and losers.
In general, people who are young and healthy will subsidize people who are older and sicker.
For example, a 25-year-old man now can buy a health plan with a $3,000 deductible for about $100 a month, said Jeff Lisota, a vice president with Robertson Ryan & Associates Inc., an insurance broker. He estimates that the same man could pay $250 a month for the same coverage next year.
People under 30 can buy plans that cover only major medical expenses. Still, most people in the individual market, particularly the young, will end up paying more for coverage than they do now if they aren't eligible for subsidies, according to insurance brokers.
"When you are young, you are cheap. When you are old, you are expensive," Aaron said. "And the objective here is to smooth premiums over life cycle and over health status."
The biggest winners will be the long-termed uninsured — primarily people in low-wage jobs that don't provide health benefits and people with pre-existing health conditions who were locked out of the market in many states.
Much of the Affordable Care Act is aimed at benefiting them.
But the law indirectly gives almost everyone a bit more financial security. Someone with a health problem who loses his or her job, for example, now will be able to buy health insurance. Previously, a scenario like that could have been financially crippling.
Competition may increase
The expansion in coverage is being paid for largely through a mix of taxes and smaller increases in Medicare payments to hospitals and Medicare Advantage health plans in future years.
But it also is being paid for partly by the changes in the individual insurance market that will raise rates for people, particularly those who are young or who are not eligible for subsidies.
"We are seeing a number of different changes occur at once," said Custer, the Georgia State professor.
The result is a one-time adjustment in rates that is painful for some, beneficial for others.
Custer, Aaron and others also expect more health insurers to sell plans in future years on the online marketplaces being set up under the law, despite the marketplaces' disastrous start that has dismayed even die-hard supporters of Obamacare.
One of the goals of the law was to increase competition in the individual insurance market by requiring them to offer similar coverage — making it easier for people to compare plans.
"You have plans competing on a more level playing field," said Purva Rawal, a senior manager with Avalere Health, a consulting firm in Washington, D.C.
But Miller of the American Enterprise Institute warned that there are limits to standardization.
"Sometimes you are not standardizing what needs to be standardized," he said.
It also can mean bureaucrats decide what consumers should buy as opposed to letting consumers decide for themselves what they want to buy.
"That's what's driving this sudden collision with reality," Miller said. "This stuff is not a concept or theory. It's actually being put into practice and it doesn't match up with where people already are and where they'd like to stay."
To Aaron, though, the cancellation letters that thousands are receiving mean that better coverage options lie ahead.
"The cancellation of policies is not a sign that health reform is failing," Aaron said, "but it is succeeding."
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