Dueling Attempts to Address Cancelled Health Insurance Policies

Yesterday President Obama announced a new policy for health insurance plans offered in the individual market.  This announcement falls on the heels of less than ideal health insurance exchange enrollment figures released earlier this week.

This new policy does not require insurers to continue to offer these plans to individuals.  Whether individuals will be allowed to keep their plans will depend on two factors: (1) if the insurer decides it wants to continue to offer the product and (2) if the state insurance commissioner allows insurers to continue to offer these plans.  Plans will have to inform individuals of coverage options and the availability of tax credits available to them on the health insurance exchanges.  This new policy pertains to plans that are renewed in 2014.

Example 1

For three years Bob has purchased an individual health insurance policy from Acme Insurance Co.  This policy is very limited and does not cover maternity benefits.  Because his plan doesn’t cover all the ten essential health benefits (a list of such benefits is available here) that all plans offered in the exchange must provide, Bob receives a notice from Acme Insurance Co. canceling his policy.

Now, under the new policy, if Bob lives in a state where the State Insurance Commissioner will allow the sale of such policies AND Acme Insurance Co. decides to keep offering his policy, then Bob will be able to keep his health insurance policy.  However, Acme Insurance Co. will have to tell Bob what benefits are not included in the plan (in this case, maternity benefits) that are available to individuals on the health insurance exchanges.  Acme Insurance Co. will also have to inform Bob that depending on his income he may qualify for tax credits if he purchased health insurance on the exchanges.  

Example 2

For five years Janet has purchased an individual policy through RU Insured Co.  This policy is very limited and does not provide any prescription drug coverage.  Because her plan does not cover one of the ten essential health benefits (prescription drug coverage), she receives a notice from RU Insured Co. cancelling her policy effective January 1, 2014. 

However, unlike in the example above, Janet lives in a state where the State Insurance Commissioner is unwilling to allow companies like RU Insured to continue to sell plans that are not comparable to plans offered in the health insurance exchanges.  So, notwithstanding yesterday’s announcement, Janet will not be able to keep her existing health insurance policy from RU Insured. 

Over the past few months, individuals who had these plans have been receiving notices announcing their plans would be cancelled.  It is unknown exactly how many individuals have received such notices.  Some individuals who have received these cancellation notices are finding it more expensive to purchase health insurance coverage through the health insurance exchanges.

Shortly after details of this new policy were released, skepticism abounded as to whether this policy is the appropriate remedy to address the cancelled policies.  The American Health Insurance Plans (AHIP), the trade association for health insurance companies, released a statement warning that altering the rules after plans have had to comply with the Affordable Care Act (ACA) requirements “could destabilize the market and result in higher premiums for consumers.”  The National Association of Insurance Commissioners (NAIC) and the American Academy of Actuaries expressed similar concerns with the proposal.

At the same time, Rep. Upton (R-MI) has proposed legislation (H.R. 3350) that would not only individuals to renew these policies, but also would allow insurance companies to sell new policies that fail to meet the minimum requirements imposed under the ACA.  Such policies could be sold through 2014.

Example 3

Max has an individual health insurance policy from OK-R-US Insurance Co.  This is a catastrophic policy that doesn’t provide much coverage (only covers four out of the ten essential health benefits) and charges him more because of his pre-existing conditions.  Max’s friend Lauren would like to buy the same policy. 

Under the Administration’s proposal, Lauren would not be able to purchase this policy from OK-R-US because insurance companies would not be allowed to sell new policies to individuals.

Under H.R. 3350, OK-R-US would be allowed to sell Lauren a new policy. 

The White House released a Statement of Administrative Policy threatening to veto the legislation.

This afternoon, by a vote of 261-157, the House passed H.R. 3550; 39 Democrats voted in favor of the legislation and four Republicans voted against the bill.  The legislation now moves to the Senate, where Senator Mary Landrieu (D-LA) has introduced legislation (S. 1642) that would allow plans to continue offering policies only to current policy holders and, similar to the Administration’s proposal, these plans would have to inform policyholders about the availability of plan options on the health insurance exchanges.  However, unlike the Administration’s proposal, Senator Landrieu’s legislation would allow insurance companies to continue to offer these products beyond 2014.

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