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Oct. 30, 2013
News that health insurers are ending the policies of what could be millions of Americans has rattled consumers and added to the debate over the health reform law.
Notices began arriving earlier this month to people who purchased their own health insurance plans since March, 23, 2010 — when the Affordable Care Act (ACA) was enacted. People who get health insurance through their employer are not affected; nor are those with individual plans purchased before March 23, 2010 — those plans are grandfathered.
The ACA requires plans sold since the law's enactment to cover "essential health benefits" (that includes covering childbirth and basic preventive care, for example). If they do not do so already, such plans must be updated to incorporate the minimum benefits.
House Republicans sparred with Health and Human Services Secretary Kathleen Sebelius today over the cancellations, with Sebelius saying the law doesn’t require insurers to discontinue plans if they were in effect at the time of the law’s enactment.
No one knows how many of the estimated 14 million people who buy their own insurance are getting such notices, but the numbers are substantial.
In Kansas, the state's largest insurer — Blue Cross Blue Shield of Kansas — has said that about 35 percent of people who purchase its individual plans (vs group or employer coverage) do not have grandfathered plans and may be required to update their plans. The remaining 65 percent of people have grandfathered plans which they can keep so long as they keep renewing the plan as offered by the insurer.
Many non-grandfathered plans include most — if not all — of the essential health benefits required by the ACA, said Kansas Blue Cross officials, and so their coverage and premiums will not change dramatically. Nevertheless, they may receive a letter notifying them of their options to update their coverage to comply with the law.
Of those people required to update their plans, some may see their total premiums go up.
However, many will now qualify for tax credits to buy updated insurance plans via the new marketplace — and so the amount they actually pay could be slashed dramatically. Those with incomes between 100% and 400% of the poverty level will qualify for tax credits. For example, a family of four earning between $23,050 and $92,200 will qualify for tax credits. Until HealthCare.gov is working properly, you can go to InsureKS.org to see how much tax-credit assistance you qualify for, as well as get estimates for insuring your family under the ACA.
Here is a guide to help you understand the bigger picture, including why your premiums and benefits are likely to change next year and what you should consider as you shop for a new policy.
The so-called individual market was targeted by the health reform law because it didn’t work well for many people who do not get coverage through an employer, particularly those who were older or had health problems. The latter were often rejected for coverage, charged more or had their conditions excluded from coverage. Some policies were so skimpy they provided only the barest of coverage when someone did fall ill.
Starting Jan. 1, insurers can no longer reject people who are sick or charge them more than the healthy under the ACA, often called Obamacare. They must also beef up policies to meet minimum standards such as the essential health benefits, including prescription drug coverage, maternity care and mental health services.
Most likely your plan didn’t meet all the standards of the federal health reform law. One type of policy being discontinued by Florida Blue, for example, did not cover hospitalizations or emergency room visits and paid a maximum of $50 toward doctor visits.
It’s possible your plan also had deductibles and other potential expenses — such as co-payments for doctors and hospital care — that exceeded the law’s annual out-of-pocket maximum of $6,350 for individuals or $12,700 for families.
Some insurers may have just decided to end certain types of policies, something they have always had the ability to do. Some policies that fail to meet the law’s standards can still be sold, but only if the insurer decides to continue them and they are “grandfathered,” meaning you purchased one before March, 23, 2010 and neither you nor the insurer has made any substantial change since then. Adjusting an annual deductible, which many people do each year to keep down their premiums, is a change that could end "grandfather" status.
Some consumers fear they are being targeted because they are unhealthy or otherwise unprofitable for an insurance company.
Kansas Insurance Commissioner Sandy Praeger said insurers can only discontinue entire blocks of business and cannot simply pick and choose certain customers to cancel. Those whose policies are cancelled can sign up instead for a new plan and can’t be rejected because of their health.
Insurers say they are ending policies that don’t meet the law’s standards or were not grandfathered. And some of those are profitable plans: Kaiser Permanente in California, for example, says the biggest block of policyholders losing their current coverage were enrolled in a popular $4,000 deductible plan with no maternity benefits that was doing so well that they had not had to raise rates in several years. They actually had to send rebates to policyholders last year under an Obamacare provision that requires insurers to spend at least 80 percent of enrollees’ premiums on medical care or issue rebates.
In some states, insurers are offering selected policyholders a chance to “early renew,” meaning they can continue their existing plan through next year, even if it doesn’t meet all the law’s standards. If you choose this option, your premium may still go up, but the cause would be medical inflation, rather than the need to add benefits because of the health reform law. Not all states allow early renewals. Fearing insurers would offer such renewals only to their most profitable plans, a handful of states, including Illinois, Missouri and Rhode Island, barred insurers from doing it.
Under the old rules, insurers could decide whether to accept you – and how much to charge — based on answers to dozens of medical questions. You no longer have to fill out those forms. Starting Jan. 1, insurers can no longer charge women more than men, reject people who are sick or charge them more and can charge older people only three times more than younger ones. They’re also adding new benefits.
As they drew up the rates for 2014, insurance firms had to make educated guesses about how many customers would stay, how many new ones they would attract, and what the health conditions of those new members might be. Actuaries say the new rules on how much insurers may vary rates level the playing field, making premiums more of an average. Older buyers or those who had above-average health problems – and whose former rates reflected those problems – may find their premiums going down.
Younger or healthier people, on the other hand, may find premiums going up, sometimes sharply. Under the new rules, consumers “are not paying based on their own health status, but an average health status,” said Robert Cosway, an actuary with consulting firm Milliman. “The positive side is that people in poor health won’t have to pay as much, but the way you get there is that people in better health have to pay more.”
Insurers base premiums on a number of factors, including medical inflation and the cost of implementing insurance rules. A report on the California market done by Cosway at Milliman estimated that medical inflation and changes from the health reform law could add about 30 percent to the average premium in California. The biggest chunk of the increase was attributed to insurers being required to accept everyone, even those with pre-existing conditions.
That requirement polls well with the public. But it makes insurers nervous because they can no longer reject the costliest patients. While consumers like George Anders of California says he supports the concept, he’s not happy that his current plan is being discontinued. Anders, a contributing writer for Forbes and author of a critique of HMOs called Health Against Wealth, said the premiums for a new policy that covers him, his wife and two children will about double, although his annual deductible may go down.
“As a social policy, I’m glad to see everyone get coverage, but if you’re going to add cost to the system, I’d like to see it spread equitably,” perhaps through an across-the-board tax, rather than just hitting policyholders, Anders said.
Except for a fortunate few, everyone is likely to develop some kind of health problem or face an accident sometime in their lives. Policy experts and regulators say insurance works best when it spreads risk across a large group of people. Your house may not burn down this year, but you pay for insurance coverage just in case.
Again, it’s about spreading the risk. Men may not need maternity care, but women don’t need treatment for prostate cancer and those costs are baked into the rates, too. Older men, and women past child-bearing age, are more likely to need treatment for heart disease, artificial hips or other illnesses that younger men and women are less likely to need.
“The whole concept of insurance is you can’t just pick and choose the benefits you want,” said Kansas Insurance Commissioner Praeger. If people – especially older ones – get premiums based solely on what they might need, she said, “it could cost a whole lot more.”
Under the health reform law, insurers who fail to spend at least 80 percent of their premium revenue on medical care have to issue rebates to consumers. Those rebates for 2014 policies won’t be seen until 2015, however.
Experts say people should scrutinize the terms of their soon-to-be-discontinued policy and compare them with what new policies offer. The monthly premium is just one factor in cost. Also note the deductible. Is it per person? What is the maximum deductible if two or more family members fall ill in the same year? Finally, note the annual out-of-pocket cap, which is the maximum you pay in deductibles and co-payments for medical care during the year.
“People need to be aware of their range of options,” said Cori Uccello, senior health fellow at the American Academy of Actuaries. Direct comparisons may be difficult, she warned, as the new policies will often cover a wider range of benefits, but you should be able to compare deductibles and co-payments for various services, including drugs.
Some insurers are recommending new plans that are most similar to the one being discontinued, and could automatically enroll you in such a plan if you take no action.
Those are not your only options. You should double-check and compare a range of plans, experts say. An independent broker can show you plans from various carriers. You can also check your state’s online marketplace or log onto or call HealthCare.gov, the website serving 36 states that opted not to create their own marketplaces, including Kansas.
While consumers are having trouble creating accounts through healthcare.gov, you can go to InsureKS.org to view estimates for coverage based on you and your family's information, as well as see how much tax-credit assistance you qualify for.
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