Changing Rules Will Disrupt Health Insurance Market, Experts Warn

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Health insurers, state insurance regulators and some health-care experts are warning of chaos and dire consequences Thursday after President Obama‘s decision to allow insurers to continue to offer certain individual health plans with their current terms rather than having to offer new coverage to meet higher standards set by the Affordable Care Act.

“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,” Karen Ignagni, president of America’s Health Insurance Plans, said in a written statement released shortly after Obama’s announcement.

The Obama administration change raises a number of practical questions that include:

  • Insurance companies have spent years getting ready for new requirements that take effect Jan. 1, and their health plans for 2014 were designed accordingly. Is there enough time to offer alternatives next year with the current terms?
  • Even if the terms of a plan remain unchanged, insurers still have to adjust prices for medical inflation and based on the cost of medical claims. How long would it take to make those changes and get them approved by state insurance regulators?
  • Public health exchanges only offer health plans with more robust coverage as required by the Affordable Care Act. The exchanges are built on the premise that young, healthy people will offset the cost of sick customers. But if healthy people are allowed to keep lower-priced plans off the exchange, does that create a high-risk pool on public exchanges?
  • If public exchanges become high-risk pools, insurers will ask for higher premiums when they price 2015 plans. If regulators don’t allow the higher prices, insurers could retreat from the exchange.
  • Doesn’t this merely postpone for a year the situation people will face of not being able to keep their current policy — meaning the notices people got this fall will be sent out again a year from now?

“I don’t know how this is going to work,” said Keith Stover, a lobbyist and spokesman for the Connecticut Association of Health Plans, a trade group for the health insurers.

“I think it’s fair to say that it takes a situation that is complicated and adds, potentially, another layer of complication.”

Some individually insured people in Connecticut received letters from health insurers this fall informing them that the coverage they have this year won’t be offered next year because the plans don’t have minimum coverage required by Affordable Care Act, called “essential health benefits.” The letters directly conflicted with Obama’s oft-repeated promise when he was pitching the Affordable Care Act: If you like your health plan, you can keep it.

America’s Health Insurance Plans, the trade group, said the only reason consumers are getting notices about their current coverage changing is because of Affordable Care Act’s requirements that health plans cover a broad range of benefits beyond what people choose to purchase. The individual plans that insurers are canceling offer less coverage at a lower price.

“Premiums have already been set for next year based on an assumption of when consumers will be transitioning to the new marketplace,” Ignagni said. “If now fewer younger and healthier people choose to purchase coverage in the exchange, premiums will increase and there will be fewer choices for consumers.”

The National Association of Insurance Commissioners, a group representing regulators in all 50 states, released a statement expressing concern that the Obama administration is using its “enforcement discretion” to delay enforcing plans that are currently in effect.

“This decision continues different rules for different policies and threatens to undermine the new market, and may lead to higher premiums and market disruptions in 2014 and beyond,” said NAIC President Jim Donelon, who is Lousiana’s insurance commissioner.

ConnectiCare President Michael Wise said in a statement that the entire health industry has been operating in a fluid, rapidly changing regulatory and competitive environment for three years.

“At this time, without guidance from our regulators at both the state and federal level, it is difficult to forecast how the President’s new direction will be implemented,” Wise said.

Aetna spokeswoman Susan Millerick said in a statement that the insurer supports efforts to allow customers to keep what they have.

“However, we will need cooperation and expedited approval from state regulators to remove barriers that would make it difficult to make this change in such a short period of time,” Millerick said. “State regulators will need to allow us to update our policies and secure appropriate rates so we can get these plans back in the market.”

Cigna Corp. spokesman Mark Slitt said in a statement that the company believes strongly that if individuals want to keep the plans they have and are comfortable with, they should be allowed to do so.

“From the beginning of the health care debate, Cigna believed that the preservation of choice for consumers is key,” Slitt said.

The Consumers Union released a statement in support of Obama’s decision, saying it gives some consumers peace of mind and more time to evaluate their insurance options without fear of being uninsured.

“The insurance industry has shown that, when left to its own devices, it would rather not give consumers all the information they need to make informed decisions,” DeAnn Friedholm, director of health reform for Consumers Union, the policy and advocacy division of Consumer Reports, said in a statement. “That’s why it is imperative that consumer-friendly guidelines are put in place so that this new round of insurance company letters presents in a clear, standardized way what is not included in their plan and where consumers can go look for insurance options.”

No-Win Situation

Some insurers allowed customers “early renewal,” meaning that if they signed up for a health plan by next month, the plan would not have to comply with the 2014 rules. That means people who wanted to avoid higher-priced plans already had an option to do so before Obama’s decision. But other insurers converted all their health plans to the new requirements, and that’s what led to the letters and the outrage about some people not able to keep their current plans.

If insurers want to restore the discontinued health plans, they still will have to re-price them for medical inflation and get them approved by state regulators. That process ordinarily takes months.

“They’re sure as hell not going to want to offer the same policies at last year’s rate, because they’ll take a loss,” said John Aloysius Cogan Jr., associate professor at the University of ConnecticutSchool of Law and former executive counsel for the Rhode Island Office of the Health Insurance Commissioner.

What’s worse, Cogan said, is that insurance companies offering health plans on newly created public exchanges, such as Access Health CT, built into their rates assumptions that old policies would expire and those customers would shop on the exchange.

“Who is going to stay in the old policies?” he said. “The healthy people with the cheap policies.”

The exchange offers more robust coverage as required by the Affordable Care Act, though it comes at a higher price. That coverage is theoretically more attractive to people willing to pay for it — sick people who need good coverage. However, the price is offset to a degree by federal subsidies for people who earn up to 400 percent of the federal poverty level, which is $44,680 for an individual or $92,200 for a family of four.

If the exchanges can’t attract attract young, healthy people, insurers will seek raise prices a year from now to cover expensive medical claims.

“I think this is really a no-win situation for everybody,” Cogan said, adding later that the decision creates “chaos” in the market.

Connecticut Insurance Commissioner Thomas Leonardi said in a statement Thursday that the state Insurance Department is examing the full effect of the decision on Connecticut policyholders.

Gov. Dannel P. Malloy said in a statement that his office is examining the “ramifications of this announcement and how it will affect all policyholders.” He said Lt. Gov. Nancy Wyman will convene a meeting with Connecticut’s public health exchange, Access Health CT, and other stakeholders.

“In the meantime, I would urge residents to go to the Access Health CT website and compare their existing policy to the ones offered there,” Malloy said. “As is often the case, these plans provide a superior level of coverage at a lower cost.”

About Matthew Sturdevant

Full-time staff journalist at The Hartford Courant and magazine freelancer with a master's degree in writing from Dartmouth. My work has appeared in The Los Angeles Times, The Chicago Tribune, Taiwan News, The Baltimore Sun and many other news sources. My blog has been referenced by Politico.com, the Kaiser Family Foundation, the Georgetown Law Library and a number of organizations in healthcare and business. Sturdevant’s blog is "a well-written wealth of ideas," said The Donald W. Reynolds National Center for Business Journalism, (businessjournalism.org, May 18, 2011). I have experience writing for newspapers, magazines, Web sites and blogs as well as shooting and editing video. I made regular appearances on news-talk radio and on the NBC affiliate station in Corpus Christi, Texas. I made occasional appearances on the Fox affiliate in Connecticut promoting Hartford Courant articles.

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