Facing a revolt by Democratic lawmakers unhappy with the rollout of the health law, the Obama administration announced this morning that it will allow insurers to renew cancelled health plans that fail to meet the standards set by the Affordable Care Act.
Insurers will be required to notify customers with cancelled plans that they have the option of upgrading to an ACA-compliant plan. Plans can be extended through the end of 2014.
The decision does not impact new customers who will still be required to buy coverage that meets the stricter standards set by the new health law – either on the exchanges or directly from an insurer.
The move is likely to add additional confusion and uncertainty to an already chaotic marketplace shaken by the widely publicized problems at HealthCare.gov.
It is unclear, for example, how the customers of specific health plans who have already had their coverage cancelled will be impacted. The decision of whether or not to reinstate individual plans is being left up to individual insurers.
Exactly why they’d want to reinstate the cancelled plans isn’t obvious. Five million people have received cancellation letters according to one recent estimate.
Health plan insiders have argued for months that reversing course will be difficult, if not impossible, for plans that have built their actuarial models on the assumption that certain numbers of healthy people will enroll by certain dates. Industry representatives immediately warned that the impact would likely be higher premiums.
In a letter sent to state health insurance commissioners this morning, Center for Consumer Information and Insurance Oversight (CCIIO) director Gary Cohn spelled out the details of the fix. A plan must have been in effect on October 1st, 2013. Health plans must notify consumers in writing of their eligibility for an ACA-compliant plan. And they must explain what they’re not getting. A request that, in effect, asks insurers to advertise the Obamacare plans, something they haven’t exactly been enthusiastic about doing in the past. That may or may not turn out to be a smart move.
Health plan consultant Robert Laszewski – a frequent THCB contributor – warned:
This means that the insurance companies have 32 days to reprogram their computer systems for policies, rates, and eligibility, send notices to the policyholders via US Mail, send a very complex letter that describes just what the differences are between specific policies and Obamacare compliant plans, ask the consumer for their decision — and give them a reasonable time to make that decision — and then enter those decisions back into their systems without creating massive billing, claim payment, and provider eligibility list mistakes. This puts the insurance companies, who have successfully complied with the law, in a hell of a mess.