Obama’s health coverage plan and how it destroy’s existing plans

I was trying to figure out what the whole grandfather clause in the medical bill was actually exempting you from, i.e. why do we care about grandfathered medical plans?

SEC. 401. TAX ON INDIVIDUALS WITHOUT ACCEPTABLE HEALTH CARE COVERAGE.

states that

1. if you do not have "acceptable coverage" for you or your dependents then you pay an additional 2.5% income tax (capped at the "applicable national average premium rate")
2. "acceptable coverage" can be any plan that meets this bill’s minimum coverage or can be any grandfathered coverage

SEC. 102. PROTECTING THE CHOICE TO KEEP CURRENT COVERAGE.

states that grandfathered coverage is coverage that

1. you are enrolled in prior to 1/1/2013
2. "the issuer does not change any of its terms or conditions, including benefits and cost-sharing, from those in effect as of the day before [1/1/2013]"

What does this mean? It means that if your existing coverage does not meet the "Acceptable coverage" guidelines of the bill, then any change to benefits or cost-sharing nullifies the allowance of that coverage to be grandfathered in. Then you either have to go get coverage that is "acceptable" or you get hit with a new tax liability. In addition, employers can have up to an 8% excise tax for not providing an acceptable option.

This does sound like the death of existing plans that don’t meet the existing bar because they will die of attrition as they are unable to make any changes to meet the needs of the market moving forward.

So Obama is correct when he said that it gives "you the option to keep your insurance if you're happy with it.” But that choice can no longer be made once the plan goes into effect.