There have been many stories in the news about plan cancellations and President Obama’s recent announcement that insurers will have the opportunity to continue selling plans they otherwise would have cancelled. While some have celebrated the President’s announcement, plan cancellations really mean that 7 million to 10 million people can now purchase better insurance plans. Plan cancellations are an indication that the weak standards of the individual health insurance market are finally getting fixed.
So did President Obama break his promise that “if you like your plan, you can keep it”? Not really. Back in 2010, insurers were allowed to keep plans that they wanted to have “grandfather status,” or carry over into the 2014 Marketplace. To keep their grandfathered statues, insurers were not allowed to alter plans’ benefits or cost sharing greatly. Some plans are currently being cancelled because in 2010, insurers decided they wanted to raise premiums or reduce benefits on existing plans, or create new plans that did not meet the grandfathered rules. If the insurer changed a plan or if a consumer changed plans, this broke the grandfather status of the pre-2010 plan. When Obama said, “If you like your plan you can keep it,” this meant only if insurers choose to keep offering it.
Prior to the ACA, many consumers who signed up for coverage in the individual market thought they would be protected from high bills if they got sick or hurt. However, that was often not the case. Many of the people who were enrolled in these plans were underinsured and wouldn’t know it until something catastrophic happened and their insurance did not provide the safety net they expected. Insurers were allowed to discontinue plans, raise premiums, or cut benefits when they chose, and they could do so based on the health status of their enrollees.
Under the ACA, the individual market is finally seeing a new day. Plans are required to cover 10 areas of essential health benefits, which means they can’t skimp on coverage like maternity care or chronic disease management. Plans also cannot discriminate based on gender or pre-existing conditions, and prices prorated with age are greatly limited. People who have received plan cancellation notices can go to the Marketplace where many will find a lower-cost plan. Through the Marketplace many of those people will receive financial assistance through federal tax credits, and will get higher value for their premium dollars.
However, the issues with the Healthcare.gov portal have made it difficult for those who have had their policies cancelled to enroll in new and, usually, cheaper and better plans through the Marketplace. Because people had a hard time understanding the plan changes and accessing options, the plan cancellation issue gained traction. In response to this, President Obama recently announced consumers can renew these cancelled plans for 2014. President Obama’s ruling leaves it up to state departments of insurance to decide whether to allow insurers to keep offering non-ACA-compliant plans. Insurers can also decide whether they will continue to offer the old plans or not. President Obama’s rule gives consumers another option in the individual market—to keep their existing plan. Importantly, it also requires insurers to tell consumers the difference in benefits between their current plan and the ones offered on the Marketplace. This transparency shows consumers the risks of where their current plans fall short.
Despite this change, the best coverage option for most consumers is still to shop for a plan in the Marketplace, since these plans are higher value and may be more affordable. Importantly, consumers who stick with their existing plans will not be eligible for tax credits to lower the cost of premiums or for cost-sharing assistance.
The future of this issue is untold: If Healthcare.gov technology issues are not resolved soon, consumers whose plans have been cancelled face obstacles to enrollment in new plans on the Marketplace. If not, this issue may continue to see interest in Congress where there are currently a number bills moving. A bill introduced by Congressman Upton (R-MI) allows insurers to keep selling plans that are not compliant with ACA regulations and allows any plan insurers sell to satisfy the individual mandate requirement. Senator Udall (D-CO) has introduced a bill that would allow people in the individual insurance market to keep their current plan for up to two more years.
People in the individual market now have more options: they can keep their current plan, if their insurer chooses to continue to offer it, or choose from better options on the Marketplace. Either way, information is a consumer’s strongest weapon. You wouldn’t buy auto insurance that doesn’t cover accidents, so why buy insurance that doesn’t cover all your medical needs?
-- Sarah Gordon, Private Insurance Intern