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President Obama’s Announcement

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This was sent to me in an email from Humana – gives a nice summary of President Obama’s announcement last week about keeping your current coverage.

 

The biggest news in the health care arena has been President Obama’s announcement regarding the treatment of discontinued 2013 health plans.

Policy holders across the country have been receiving letters from their health insurers telling them their current health plans do not comply with the health reform requirements that go into effect on Jan. 1 because (1) they don’t meet the reform law’s new minimum benefit requirements, and (2) they aren’t eligible to be grandfathered (regulations allowed for some old health plans to be locked in). The notifications affected individual and small business health plans.

Some health insurers like Humana, where it was permitted under state law, gave policy holders a choice.

  • They could “early renew” their current, non-health reform compliant coverage, which meant signing up for a year-long policy before the end of 2013.
  • They could end their current coverage at the end of the year and sign up for a new reform-compliant version of their health plan for 2014.
  • They could compare other options on the health insurance marketplace.

Many other insurers simply explained that policy holders’ current coverage was being cancelled.

The arrival of those letters took many Americans by surprise, since the President had repeatedly promised, “If you like your health plan, you can keep it.”

So last Thursday, the President responded to the public and political pressure to make his promise true. “I’m offering an idea that may help,” he said: He proposed that for 2014 – one year – health insurers be allowed to continue to sell health plans that were due to be cancelled at the end of 2013. “State insurance commissioners still have the power to decide what plans can and can’t be sold in their states,” Obama explained. “There’s going to be some state-by-state evaluation of how this (proposal) is handled.”

  • The industry group America’s Health Insurance Plans (AHIP) immediately released a statement saying, “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.”
  • The National Association of Insurance Commissioners released a statement reiterating AHIP’s concerns and added, “It is unclear how, as a practical matter, the changes proposed today…can be put into effect,” since rates and plans for 2014 had already been approved in many states.
  • Insurance consultant Robert Laszewski explained the challenge in a note to clients: “This means that the insurance companies have 32 days to reprogram their computer systems for policies, rates and eligibility, send notices to policyholders…ask the consumer for their decision…and then enter those decisions back into their systems.”
  • An analyst with Citigroup wrote in a report, “The complexity of trying to uncancel millions of canceled individual policies with only six weeks left in the year is staggering.” He predicted the “enormous administrative burden” would mean many insurers would choose not to extend coverage.

As the New York Times wrote, “It remained unclear just how much impact the fix delivered by an apologetic Mr. Obama would actually have. …There is no guarantee that insurers will…allow people to stay on their existing plans…or that states will allow such renewals.”

Some health plans may have an easier time than others implementing the President’s proposal. Humana, for example, has already reached out to members in states where permitted and offered them the option to retain their current health plans, extending their current coverage to the end of 2014.

States are reacting to the President’s announcement in different ways. For example, the insurance commissioners in the states of Rhode Island and Washington immediately responded they would not follow the President’s proposal to allow the continuation of 2013 policies into 2014. Kentucky and Ohio said they would work to help health plans provide their members with the option of renewing their 2013 policies.

The executive director of the industry group California Association of Health Plans said he was opposed to the idea of reversing course. “The entire underlying premise of the ACA – balancing costs of the young, old, sick and healthy – has been left adrift with this announcement,” he said.

Premium Increases

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As more people are able to explore the healthcare.gov website – and as cancellation letters force people who currently have insurance to look for another health plan – the issue of premium increases is making news. So far, much of the reporting is in the form of anecdotes – stories of families whose premiums have doubled pitted against stories of people who shopped on the exchange and got a better deal than they had had before. As a group, healthy young people, especially, have seen their premiums increase. Older people with chronic health problems, on the other hand, are seeing their premiums go down.

But a project management memo from the Oct. 28 meeting of health reform officials expressed concern about the issue: “A general concern: getting to the point where the website is functioning properly and individuals begin to select plans… in some cases there will be fewer options than desired… Additionally, in some cases, there will be relatively high-cost plans.”

Robert Laszewski, a health insurance industry consultant, said a rise in rates is inevitable. He estimates that the new law has resulted in an estimated 30 to 50 percent increase in baseline costs for insurers. “We’ve got increased access for sick people and an increase in the span of benefits, so something’s got to give,” he says.

Van Jones, a former White House adviser, pointed out, “Here’s what’s really going on. There were winners and losers under the last system, and there are winners and losers under this system.”

Meanwhile, the Department of Health and Human Services reported that nearly half (1.3 million) of all single, uninsured Americans ages 18 to 34 who qualify for health insurance coverage through the exchanges could find bronze-level plans for $50 or less per month after receiving a federal subsidy. 1.9 million could get bronze-level plans for $100 or less.

Democrats Call For Mandate Delay

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Nine House Democrats have proposed a delay in the individual mandate penalties until 120 days after the inspector general certifies the healthcare.gov website is completely functional. Meanwhile, 10 Democratic senators – seven of them up for reelection in 2014 – sent a letter to Health and Human Services Secretary Kathleen Sebelius saying they are “discouraged and frustrated with the problems.” They also asked for a delay in enforcing the individual mandate.

“You’re going to see more calls for delay,” Jan Crawford of CBS News predicted last weekend on Face the Nation. “But that raises its own problems. Because you’re going to have the sick people, who have been so anxious for this insurance because they’ve been denied coverage…they’re the ones who are going to get it.

“But what has to happen is that the young healthies…they’re the ones who have to sign up to make this whole thing work. If they don’t sign up – and they have no incentive because there’s no penalty; the hammer’s been taken off the table – then you get this concern about the death spiral.”

A New York Times editorial comes to the same conclusion: “Any delay past March 31 would disrupt the basis on which premiums were set for the new policies going into effect next year. … If the enrollment period is extended for a significant period, the sickest people are most likely to sign up early and the healthiest will likely hang back, driving up the costs for insurers and making premium increases likely the following year.”

The industry group America’s Health Insurance Plans also opposes a delay. Extending the enrollment period would have “a destabilizing effect on insurance markets,” spokesman Robert Zirkelbach said.

Both the President and Sebelius have said a delay isn’t necessary. If the website is fixed by Nov. 30, as the administration believes it will be, customers will still have four months to sign up.

Individual Mandate Delayed

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Individual mandate penalty delayed

October 30, 2013

The part of the Affordable Care Act (ACA or health care reform law) with the biggest impact – the individual mandate – is getting a lot of attention lately. Under the law and regulation as written, people who buy health insurance as individuals (an individual plan) can go three months without health insurance and not have to pay the individual mandate penalty. Now that individual market open enrollment goes until March 31, 2014, coverage can start as late as May 1. The Obama Administration felt like it needed to fix the problem where someone who buys insurance in the last 45 days of open enrollment still would have ended up paying part of the penalty. Because of a change to the regulation this week, this will no longer be the case in 2014. As long as people buying individual plans are signed up for insurance by March 31, 2014, they will not get hit with the penalty.

The Centers for Medicare and Medicaid Services put out guidance on October 28 that gives more information on the “hardship exemptions” for the individual mandate penalty. The Department of Health and Human Services is putting such an exemption in place for people who sign up for insurance before the open enrollment period ends on March 31, 2014. Without this exemption, individuals would have had to be covered by health insurance by March 31, meaning they would have had to sign up for it by February 15, 2014. Now, people who have signed up by March 31 will be able to claim a “hardship exemption” (without asking for it from the marketplace) on their taxes and not pay the penalty for the months in 2014 that they did not have health insurance.

A regulation with more detail should be released very soon. We will share more news when we have it.

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