Health Insurance Report™ helps you track and analyze legal, legislative, and regulatory developments affecting the health-insurance industry throughout implementation of the Affordable Care Act...
By Sara Hansard
Nov. 15 --As President Barack Obama and senior administration officials met with health insurance executives Nov. 15, a day after the president announced a transitional policy allowing insurance companies to continue canceled individual health plans in 2014, state insurance regulators were trying to determine how the new policy would be implemented and what impact it would have.
“We're in the process of analyzing it state by state,” Montana Insurance Commissioner Monica Lindeen told Bloomberg BNA in a telephone interview Nov. 15. Lindeen, vice president of the National Association of Insurance Commissioners (NAIC) and a member of its Health Insurance and Managed Care Committee, said state insurance commissioners have different types of authority, and not all have the power to stipulate whether health insurers follow the administration's new policy.
“It was suggested that the insurance commissioners controlled this. That's not necessarily the case,” Lindeen said. Insurance regulators in Washington and Oregon have authority to tell insurers whether to follow the new administration policy, but in Montana the insurance commissioner does not, she said. “So the insurance companies are the ones that are going to make that decision in my state.”
Following the president's Nov. 14 announcement in the face of consumer anger over widespread individual policy cancellations (see related article), NAIC President and Louisiana Insurance Commissioner Jim Donelon issued a statement saying state insurance commissioners “are concerned by the president's announcement today that the federal government would use its 'enforcement discretion' to delay enforcement of the ACA's market reforms in 2014 for plans that are currently in effect. This decision continues different rules for different policies and threatens to undermine the new market, and may lead to higher premiums and market disruptions in 2014 and beyond.”
Lindeen said she has spoken with executives of the three major individual insurers in Montana and she has encouraged them “to not take the president's recommendation.” She said she is concerned that continuing the canceled plans will mean that healthier people will keep their old plans while sicker people will buy through the state's marketplace, resulting in higher premiums in 2015.
About 26,000 individual policies have been canceled in Montana, primarily by the three major health insurers in the state, Blue Cross Blue Shield Montana, Assurant Health Insurance and Pacific Source, she said. The insurers are “analyzing the situation,” she said. The individual policy cancellations cover about 5 percent of the state's population, she said.
In addition to possible harm to the Affordable Care Act marketplace, the compressed time frame in which insurers and regulators have to act is a problem, Lindeen said. Since insurers were planning to cancel the policies that do not comply with ACA requirements, they did not go through the regulatory process involved in setting new premiums, she said. Under normal circumstances, insurers should be sending out premium rate notices to consumers Nov. 15 for policies that take effect Jan. 1, she said.
“There's a regulatory process we go through,” Lindeen said. “Any time you insert political decisions into that process without understanding the ramifications it can result in market chaos.”
Washington state Insurance Commissioner Mike Kreidler issued a statement Nov. 14 saying insurers in that state will not be allowed to extend their policies. Kreidler said the president's proposal is not “a good deal for the state of Washington. In the interest of keeping the consumer protections we have enacted and ensuring that we keep health insurance costs down for all consumers, we are staying the course.”
An estimated 290,000 people in Washington will need to buy new coverage, and at least half of them will qualify for a premium subsidy, the statement said.
In a Nov. 14 release, California Insurance Commissioner Dave Jones urged the state's insurers to continue policies for the 1 million Californians whose plans have been canceled. “The president's action today makes it crystal clear that health insurers and HMOs are not required by federal law to cancel existing policies,” Jones said. “I am calling on all health insurers in California to let their policyholders keep their existing coverage for an additional year if they want it” (see related article).
On Nov. 5 Blue Shield of California reached an agreement with the state to continue plans for about 80,000 of their customers after Jones called for the continuation (see previous article).
Oklahoma Insurance Commissioner John Doak said in a Nov. 14 release that the number of policies canceled in Oklahoma as a result of the ACA has been minimized through collaboration with the industry to modify policy renewal dates, which allowed most policyholders in the state to keep their coverage through 2014.
“After yet another failed initiative, President Obama is just passing the buck,” Doak said in the release. “How can the federal government make this decision without offering any guidance to the state insurance departments or the insurance carriers? Cancellation notices have already gone out. Rates and plans have already been approved? How is this supposed to work? There are a lot of unanswered questions right now. This is what you get when you pass a bill you haven't read.”
Florida Insurance Commissioner Kevin McCarty issued a statement Nov. 14 saying most health insurers in Florida have already voluntarily extended coverage for affected policyholders through 2014. He said his office would work with other companies that choose to continue coverage under Obama's transitional policy.
Other state governors and insurance commissioners issued statements saying they are reviewing the policy and discussing it with insurers in their states.
At the White House on Nov. 15 Obama, Centers for Medicare & Medicaid Services Administrator Marilyn Tavenner, and Chief of Staff Denis McDonough met with insurance executives. At the beginning of the meeting Obama said administration officials will be “soliciting ideas” from the insurance officials. “We all want to make sure Americans have good solid coverage that gives them the security they need for themselves and their family members if and when they get sick,” he said.
At a press conference in Detroit Nov. 15 after Department of Health and Human Services Secretary Kathleen Sebelius spoke at a community and social services center, she said that consumers “have some options.” By the end of November, when the troubled HealthCare.gov shopping website is supposed to be functioning better, consumers will have a “very different experience,” she said (see related article).
In a Nov. 14 statement, the American Academy of Actuaries (AAA) said the transitional policy “could lead to negative consequences for consumers, health insurers and the federal government.” Allowing consumers to retain canceled plans could affect the composition of health insurance risk pools if lower-cost individuals retain their prior coverage and higher-cost people move to new coverage, the group said.
Premiums approved for 2014 may not adequately cover the cost of providing benefits for an enrollee population with higher claims than anticipated, the AAA said. Costs to the federal government could increase as higher-than-expected medical claims are more likely to trigger risk adjustment mechanisms provided by the law, and premiums could increase for 2015 since assumptions about the composition of the risk pool would reflect plan experience in 2014, it said.
Joel Michaels, a partner who heads the health-care group in the Washington office of law firm McDermott Will & Emery LLP, told Bloomberg BNA Nov. 15 that trying to meet regulatory requirements while preparing to implement the ACA market reforms that start in 2014 is “a very heavy lift” for health insurers.
Joseph Antos, a health policy analyst at the American Enterprise Institute, which has been critical of the ACA, said it would be very difficult for states to “move so fast that any of this would happen by Jan. 1.”
In addition, Antos said, the administration has not “said anything about the individual mandate.” However, he said, the transitional policy “is perhaps more fundamental,” because it affects the comprehensiveness of coverage. “This really matters to people who support the ACA,” he said. Most of the policies that are being canceled do not provide all of the 10 categories of “essential health benefits” required by the ACA, such as maternity and prescription drug coverage, he said.
But Antos said it is unlikely that individual “shared responsibility” penalties will be collected from people who do not have coverage, as required by the ACA. The transitional policy on allowing plans that are not compliant with the ACA to continue for a year “increases the odds that some time after March 31 the White House will announce that they're not going to collect the penalty for the individual mandate. Once they've done that, it will be very, very difficult to ever reinstate it in a future year.”
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