Yesterday, President Barack Obama announced plans to allow a one-year renewal of canceled health plans (see announcement here). This announcement came after insurers sent cancellation letters to hundreds of thousands of policy holders and after the administration received criticism that it broke it's promise Americans could "keep their plans if they liked them".
Since President Obama's announcement yesterday, many questions have been circulating about this new rule - considered an "administrative fix". Can the administration do this? The state regulators can override this - will they? Will this help or just create more problems? How does this impact employees?
A new Q&A from Kaiser Health News addresses many of these questions. Here's a summary of their Q&As:
Q: What Did Obama Propose?
The administration is allowing insurers to extend existing plans for one more year for current customers.
Policies renewing before the end of this year would last until late 2014.
Policies that expire in 2014 would be permitted to extend into 2015.
In many cases the existing plans have been less expensive than policies with more benefits scheduled to take effect next year. (Before premium subsidies are applied.)
If carriers renew, they must disclose the shortfall between the benefits of the existing plan and benefits required by the Affordable Care Act. It’s unclear at this time if the insurers will be allowed to charge more for these renewed policies.
Q: Who is Affected?
Individuals and families who buy plans on their own ("individual health insurance") and who received cancellation notices in recent weeks. The administration is also allowing extension of small-employer plans that didn’t meet ACA requirements.
If employees aren’t already covered by a noncompliant plan they can’t buy in now.
Consumers covered by Medicaid, Medicare, or large employers are unaffected.
Q: What Should Employees do if They Got a Cancellation Notice?
Advocates say consumers should check with their insurer to see if they will be renewing canceled policies. Even if it is, consumers, especially those with chronic illness, should review alternatives offered in the health law’s online marketplaces to see if they offer better coverage.
Insurance sold through the marketplaces also comes with substantial government subsidies for those who qualify. The noncompliant plans Obama is allowing to be stretched into next year are not eligible for subsidies.
Q. Who Decides Whether I Can Renew a Policy Slated for Cancellation?
Insurers and state regulators will have the final say. Neither Obama nor the federal Department of Health and Human Services can force extension of the plans.
If insurers renew policies – and their state allows it – they must notify consumers and communicate that they may find other options and subsidies through the online marketplaces.
Q: How Have Insurers Reacted?
Many insurers are asking for more details. BlueCross BlueShield of North Carolina, which was canceling about 200,000 individual policies at end of the year, said it was interested in the option but not ready to commit.
Florida Blue says it will allow customers to renew 2013 policies, a decision that could affect as many as 300,000 people over the next year and immediately affects 40,000 people who were losing their existing plan at end of this year.
Some insurers are urging state regulators to disallow the extensions. In California, the state should “stay the course and transition people into more comprehensive policies,” said Patrick Johnston, CEO of the California Association of Health Plans.
The major insurance trade group warned that consumers renewing noncompliant plans will be predominantly younger and healthier, while older and sicker people will migrate to the subsidized marketplaces. That could drive up costs.
“Changing the rules after health plans have already met the requirements of the law could destabilize the market and result in higher premiums for consumers,” said Karen Ignagni, CEO of America’s Health Insurance Plans.
Q: Will State Regulators Allow This?
Some states may not. Many objected to Obama’s suggestion. Extending subpar plans could “undermine the new market and may lead to higher premiums,” said Jim Donelon, president of the National Association of Insurance Commissioners.
Washington state Insurance Commissioner Mike Kreidler said he would not allow insurers to extend the policies “in the interest of keeping the consumer protections we have enacted.”
Regulators note that existing plans might not include health-law features such as caps on out-of-pocket costs and coverage of essential benefits such as prescription drugs, maternity care and hospitalization.
But in California, Insurance Commissioner Dave Jones said he supports Obama’s suggestion and will urge insurers to extend policies. Regulators in Florida and Kentucky also said they would allow the move.
Q: Given All the Uncertainties, Will Many Consumers Renew?
It depend on carriers, insurance commissioners, and customers themselves.
What questions do you have about the new rule to allow canceled plans to be renewed? Leave a comment.