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Why some states are turning down the cancellation 'fix'

November 15, 2013

    Juliette Mullin, Editor

    President Obama's proposal to avert insurance policy cancellations for millions of Americans next year has rattled insurance commissioners and companies alike, with both groups saying that changing course so late in the year might not be feasible.

    Background on the cancellations and the proposed fix

    Despite repeated assurances that those who liked their health plans would be able to keep them, millions of U.S. residents who shop in the individual insurance market have received policy cancellation notices in recent weeks; as many as 12 million Americans may be affected.

    On Thursday, President Obama proposed a plan that would allow insurers to keep selling policies that would otherwise be cancelled. Specifically, state insurance commissioners now have federal permission to let consumers keep existing insurance policies that do not meet Affordable Care Act (ACA) requirements. However:

    • State insurance commissioners are not obligated to allow the continuations of these plans; and
    • Each insurance company can decide not to continue selling the plans.

    In essence, the White House has put the decision about whether to allow policy cancellations in the hands of insurance commissioners and companies.

    "[W]hat we want to do is to be able to say to these folks, you know what, the Affordable Care Act is not going to be the reason why insurers have to cancel your plan," Obama said at a press conference on Thursday, adding, "Now, what folks may find is the insurance companies may still come back and say, we want to charge you 20% more than we did last year, or we're not going to cover prescription drugs now."

    Some insurance commissioners won't change course

    Responding to the president's proposal, the National Association of Insurance Commissioners (NAIC) said in a statement that "it is unclear how, as a practical matter, the changes proposed today by the President can be put into effect." Noting that millions of cancellation notices have already been sent, NAIC said, "Changing the rules through administrative action at this late date creates uncertainty and may not address the underlying issues."

    In addition to technical implementation issues, NAIC worries about the market impact of letting insurers play by different rules and of changing those rules after rates have been set for 2014.

    So far, at least two insurance commissioners—Washington state's Mike Kreidler and the District of Columbia's William White—say they will not allow insurers to continue selling the old plans.

    "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," Kreidler said in a statement, adding, "We will not be allowing insurance companies to extend their policies. I believe this is in the best interest of the health insurance market in Washington."

    We don't yet know how many commissioners will follow in White and Kreidler's footsteps. In several states, including California and Kentucky, state officials have said they will allow companies to keep selling the old plans.

    Insurers consider their options

    Meanwhile, insurance companies are weighing their options. In a statement, America's Health Insurance Plans (AHIP) President and CEO Karen Ignagni said, "Changing the rules after health plans have already met the requirements of the law could destabilize the market and result in higher premiums for consumers."

    Ignagni explained, "Premiums have already been set for next year based on an assumption of when consumers will be transitioning to the new marketplace. If due to these changes fewer younger and healthier people choose to purchase coverage in the exchange, premiums will increase in the marketplace and there will be fewer choices for consumers."

    AHIP is pushing for steps "to stabilize the marketplace and mitigate the adverse impact on consumers." (It's worth noting: The White House has said it will consider easing new risks created by the change; that could be in addition to existing ACA mechanisms that aim to protect insurers from unexpected risks.)

    Insurance companies are expressing similar concerns and worry that they would not be able to change course so late in the year. "We will need cooperation and expedited approval from state regulators to remove barriers that would make it difficult to make this change in such a short period of time," Aetna spokesperson Walt Cherniak told National Journal.

    At Blue Cross Blue Shield, spokesperson Eric Lail says he thinks the insurer would be able to make the change, but doing so would require "heavy lifting."

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