Nov. 15--It was unclear Thursday whether insurance companies in California would follow President Barack Obama's lead after he announced new rules to clear the way for companies to extend the health plans of millions of people who had received cancellation notices.
Obama's move would allow, but not require, insurers to rescind the cancellations and keep the plans in place for one year.
Those old policies were slated for termination because they do not comply with the new, stiffer coverage requirements under the health care law, known as Obamacare. Insurers, especially those selling through the state-run health care exchange, Covered California, spent a lot of time and energy designing 2014 health plans that comply with the Obamacare requirements.
They calculated the premiums of those plans based on their best estimates of how many people would buy them and what their average ages and health status would be. If a significant proportion of the 1.1 million Californians who received cancellation notices were to stick with their existing plans for another year, it could siphon off a large pool of potential Covered California customers and tangle the delicate web of calculations that went into the exchange.
Health care experts say that the people most likely to keep their existing plans tend to have fewer health problems, because many of those plans carry high deductibles and require large out-of-pocket spending by enrollees. Those kinds of policies would not appeal to somebody who needs a lot of medical attention. That means Covered California could get a higher-than-expected proportion of sick people, which might in turn require insurers to revisit the premiums they have already set.
For Marianne Olson, a Tustin woman who received a cancellation notice from Anthem Blue Cross that recommended a more expensive policy, Thursday's news brought little solace.
"My first thought was, 'Oh, good, we don't have to do it for a year,' " said Olson, a stay-at-home mother of eight children. "But then I thought, 'What will the insurance companies do? They've already canceled the plans and changed premiums.
"Even if the insurance companies could afford to let us keep our policies for another year -- even if they could do that and undo the mess that's already been done -- this is still going to happen next year."
The California Association of Health Plans, the state's industry trade group, took a dim view of Obama's announcement, warning of a "significant disruption in the marketplace" if insurance companies were to reverse course and reinstate the canceled plans.
The group noted that the premiums on extended health plans could rise and "the exchange would be unbalanced with a pool of older, sicker people causing additional increases in rates. The entire underlying premise of the Affordable Care Act -- balancing costs of the young, old, sick and healthy -- has been left adrift with this announcement."
The association's comments no doubt reflect the concerns of its constituents. But individual insurance companies were lying low on Thursday, waiting for things to settle down.
Some plans circulated non-committal statements like the one from Blue Shield of California spokesman Stephen Shivinsky, who said his company "will work with state regulators, public officials and Covered California to understand the implications of today's announcement." Anthem Blue Cross, one of the state's biggest insurers, declined to comment.
Insurers are holding back not only because of the uncertainty stemming from Obama's announcement but also because their hands are tied for now.
The ones that are participating in Covered California -- which collectively account for about 90 percent of the state's individual market -- are required by their exchange contracts to cancel the non-compliant health plans on Dec. 31.
Covered California included that provision to ensure it would have access to the broadest population possible and not become a repository for people who had been priced out of the market because of pre-existing illnesses.
The insurance companies supported the move and even lobbied for it, arguing that it would put everyone on a level playing field and make premiums in the exchange more affordable.
Covered California declined to say Thursday whether it would release the insurers from their contractual obligation to cancel the nongrandfathered plans.
"We understand that people need clarity on this issue, and we are trying to assess its impact right now and analyze how we will incorporate the president's directive into our existing policy," said Sarah Sol, an exchange spokeswoman. "We are working closely with the health plans, regulators and policymakers to determine how this guideline is going to work in California."
California's insurance commissioner, Dave Jones, sent a letter Thursday to Covered California's executive director, Peter Lee, urging him to allow insurers to rescind the cancellation notices. Earlier this month, Blue Shield of California and Anthem Blue Cross, at Jones' request, announced limited rollbacks of their cancellation notices for about 220,000 people.
"Californians were told repeatedly by the federal government that they could keep their current health insurance," Jones noted. He also asked the insurance companies to reinstate the plans if the exchange unties their hands.
But even if Covered California allows the insurance companies to reverse plan cancellations, it is unclear whether they would do so, given their clear financial stake in the exchange as it is constituted.
And just because existing plans are extended does not mean their premiums won't be jacked up next year, said Dylan Roby, an assistant professor and researcher at UCLA's Center for Health Policy Research.
Given the experience of the past several years, "we may see them go up by 10 percent on average," which would hardly mollify people who have been complaining about having to pay higher rates for the new Obamacare-compliant plans, Roby said.
For that reason and others, holding onto an existing plan is not necessarily the best course of action for policyholders. Those who qualify for federal subsidies in the exchange would likely pay less than they do on their current policy even if its premium doesn't rise next year.
Insurance agents, who spend their time comparing health plans, tracking rates and keeping abreast of the constantly shifting health care landscape, said the return of canceled policies could be a big headache.
"Overall, if this really does happen, it's a positive thing," said Andrea McCloy, an agent at Robbins Financial & Insurance Services in Cypress. "But unfortunately, it does add to the confusion. We are just now stumbling over how to fill out new applications and how to get rate quotes. This is just going to generate more paperwork."
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