President Barack Obama last week granted a one-year delay to terminate individual health insurance policies that don’t meet Affordable Care Act coverage standards. The result: Almost no one’s happy.
The delay threw a curveball at insurers who already had made their 2014 premium and risk calculations. And it disappointed health care advocacy groups who want the ACA standards to apply as the law intended.
One of those groups, Families USA, said Thursday that the canceled policy situation had been blown out of proportion, given the small percentage of Americans who had the kind of individual insurance policy deemed to provide inadequate coverage under Obamacare requirements.
Families USA calculated that 5.7 percent of the under-65 U.S. population has health insurance bought on the individual market. That meant about 15.2 million people were susceptible to plan cancellations — if their policies were substandard.
A separate analysis estimated that 4.2 million people in the individual market were getting cancellation notices.
But because such policyholders have been unable to compare plans and pricing on the problematic online marketplace for ACA-approved plans, Obama ordered the one-year extension for existing policies.
Blue Cross and Blue Shield of Kansas City had already read the signs. It had acted this past summer to notify about 28,000 individual market policyholders that they could renew their plans for 2014, even if the policies didn’t meet ACA requirements.
Blue KC vice president Wayne Powell said the insurer gave those affected policyholders the option, to be exercised by Dec. 1, of renewing their current plans. A renewal count isn’t yet available.
Blue Cross and Blue Shield of Kansas, which serves the state except for Wyandotte and Johnson counties, announced Tuesday that it was offering a similar policy extension to about 10,000 affected individual market policyholders.
Conversely, Blue Cross and Blue Shield of Alabama said Wednesday that it won’t reinstate 87,000 of its canceled policies.
Some insurers nationally have said they won’t reinstate canceled policies because of state insurance office decisions. New York, Washington, Massachusetts, Minnesota and Rhode Island already have said they won’t delay cancellations, and other state decisions are pending.
Gov. Jay Nixon confirmed Thursday that Missouri will allow health insurance companies to continue offering the substandard policies that otherwise would have been canceled.
Families USA research indicated that only one-third of policyholders in the individual health insurance market tend to keep their policies for more than a year, so annual changes in that market occur regularly.
The Families USA report also noted that individual market plans that had been in effect since March 23, 2010 — the date the ACA became law — were grandfathered in and were not subject to termination.
The organization’s leader, Ron Pollock, said any insurance cancellations were worrisome but that it was important to note that the canceled policies had “Swiss cheese” coverage that often had caps and exclusions that failed to provide coverage when policyholders needed it most.
Pollock said he understood the reasons for Obama’s moratorium on the cancellations, but he would have preferred for the law to move forward to provide “more and real coverage.”
Expecting the delay or not, insurers are scrambling to comply.
It “threatens to undermine the new market and may lead to higher premiums and market disruptions in 2014 and beyond,” said Jim Donelon, president of the National Association of Insurance Commissioners.
Insurers said they were using the moratorium to give affected policyholders and insurance brokers more information about coverage options available through the ACA’s online health insurance marketplaces.
Such comparison shopping has been difficult or impossible because of the problematic federal marketplace that was supposed to begin working Oct. 1 to offer private coverage options that met ACA standards.
By shopping those policies online, consumers were to have learned if, based on household income, they were eligible for federal tax credits to help afford the policies. But consumers in Kansas, Missouri and other states using the federal marketplace have been largely unable to work through computer problems to sign up for ACA-compliant coverage.
Meanwhile, insurers around the country had begun sending out cancellation notices for non-compliant policies. Many told policyholders their premium costs would skyrocket to meet newly required coverage levels.
With the president’s declaration, insurers were able to send notices like this one, sent this week from the Blue system in Kansas:
“This governmental change will allow many of our members to keep the benefit plan they already have and like, while still allowing them to consider new plans that they may be able to purchase with the help of a tax subsidy or small business tax credit.”
The change was in line with a clarification letter to state insurance commissioners sent by the Centers for Medicare and Medicaid Services, the arm of the the U.S. Department of Health and Human Services in charge of ACA implementation.
“Under this transitional policy, health insurance coverage in the individual or small group market that is renewed for a policy year starting between January 1, 2014, and October 1, 2014, and associated group health plans of small businesses will not be considered to be out of compliance with the market reforms,” the letter said.
“It applies only with respect to individuals and small businesses with coverage that was in effect on October 1, 2013; it does not apply with respect to individuals and small businesses that obtain new coverage after October 1, 2013.”
Federal officials acknowledged that the change in policy wasn’t anticipated by insurers who had already set rates for 2014. But a “risk corridor program should help ameliorate unanticipated changes in premium revenue” and risk modification will continue to be examined, the letter said.Individual health insurance market
|Under 65, individual policy coverage||% of residents||Eligible for subsidies based on income||% eligible for subsidies|
|U.S.||15.185 million||5.7%||10.829 million||71%|