President Obama Allows Insurers to Extend Canceled Health Insurance Policies
I received a notice saying that my health insurance policy would be canceled at the end of the year. Does the President's recent announcement mean that I can keep my policy after all?
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Not necessarily. If you received a cancellation notice, you cannot assume that it has been rescinded. Insurers and regulators need to make some key decisions quickly before you'll know whether you can extend your policy into next year.
Among the problems: Many health insurance companies have sent out notices to policyholders over the past few weeks canceling policies at year-end that didn't meet the new health care law's requirements for 2014. Under the administration's proposal, insurers would be allowed to let people renew those policies through October 1, 2014 (and have them remain in force for a year after that) even though they don't meet the new standards.
State insurance regulators must now decide whether to permit insurers to extend the plans in their states, and some have expressed concern about what this rollback will do to the rest of the insurance marketplace. Many of the older policies are relatively inexpensive for younger, healthier people but expensive or unavailable to older people with preexisting conditions. If young, healthy people keep their old policies, then the purchasers of policies from the new state exchanges would include a larger proportion of older, sicker people than originally expected — which would change the risk pool and could cause future rates to rise significantly, warns the American Academy of Actuaries.
The National Association of Insurance Commissioners, the organization of state insurance regulators, immediately issued a statement: "The NAIC has been clear from the beginning that allowing insurers to have different rules for different policies would be detrimental to the overall market and result in higher premiums." A few state regulators, such as Washington State insurance commissioner Mike Kreidler, have said that they will not approve the change because of its "potential impact on the overall stability of our health insurance market."
Even if your state does approve the change, your insurer may decide not to extend your policy after all. Many insurers priced their policies recognizing that they would end before 2014, and logistically it could be difficult to undo the cancellations and get new rates approved by regulators in time for next year. "This is a process that takes several months," says Monica Lindeen, Montana commissioner of securities and insurance. "To turn that around on a dime in the 12th hour is very hard to do." She's already heard from several insurers in the past 24 hours with questions about their next steps. Aetna hopes that state regulators can expedite the process. "We support efforts to allow people to keep what they have," Aetna said in a statement. "However, 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. State regulators will need to allow us to update our policies and secure appropriate rates so we can get these plans back in the market."
Some states have already permitted insurers to renew policies before December 31 and remain in effect for a year, which would extend well into 2014. Those states may be more likely to change their rules and approve renewals after January 1. "Will more insurers do this, and will they do it with every plan?" asks Nate Purpura, a spokesman for eHealthInsurance.com, which sells individual health insurance throughout the U.S. "It's just too early to tell."
It's a good idea to wait a few days before calling your insurer to find out about your options. In the meantime, try to compare your current policy with policies offered on your state insurance exchange. Focus not just on the sticker price, but also on the price you'd pay after any subsidy. If you earn between 100% to 400% of the federal poverty level (up to $46,000 for an individual or $94,000 for a family of four), you could qualify for a subsidy to help with the cost. (See Calculating the Health Insurance Subsidy for information and resources to help determine whether you qualify for this tax credit.) Focus, too, on how your coverage may differ under a new policy — it may include some extras you don't need, but it may also add some important coverage, too. And understand that rates are likely to rise for your current policy, too. "Even if you can keep the policy, that doesn't mean you'll get to keep it at the same rate," says Lindeen. "Most likely they will see an increase at renewal, just like their policy renewals in the past."
You may still have trouble buying a policy through HealthCare.gov and some state exchanges. My column on navigating around the Obamacare sign-up problems can give you some ideas for alternative ways to check on prices and sign up for coverage.
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