Q&A: Sorting Out the Controversy Over Canceled Insurance Policies
As even casual observers know at this point, the Affordable Care Act is complicated by a combination of partisan politics, hobbled government websites, misinformation and the byzantine practices of the insurance industry. So it is with President Barack Obama's seemingly straightforward request that consumers should be allowed to renew health insurance policies that their insurance companies canceled as the ACA required.
Turns out, the president's request is not so straightforward at all.
That is why, a week later, many state officials and insurance carriers are still wringing their hands over whether to comply with Obama's request.
Already, there have been some paradoxes. Some states that have always been on board with the president's health reforms, such as Washington and New York, have declined the administration's request and will not allow renewals of insurance policies that do not meet ACA standards. Meanwhile, other states that have been resolutely opposed to the president all along, such as Mississippi and Oklahoma, were already allowing those renewals.
Here is an explanation of the cancellation issue and a chart showing how states have responded so far to the president's request.
What is the problem in the first place?
The ACA set minimum standards for all individual health insurance policies sold after Jan. 1, 2014, not just those sold on the insurance exchanges. For example, all policies must cover a defined set of services, such as maternal health care, mental health care and pediatric dental and vision care. Insurance carriers that offered policies that did not cover the required benefits or that placed dollar limits on coverage informed millions of policyholders that their existing policies would not be renewable into 2014. That was actually a choice the insurance carriers made themselves. The policies could have been renewed for a year, even if they didn't comply with the ACA and even if they remained in effect into 2014. Many insurance carriers simply decided they wouldn't renew them. Many consumers were surprised and upset about the cancellations because Obama had repeatedly said about the health law: “If you like your health care plan, you can keep your health care plan.”
Under federal law, the carriers had to accompany the cancellations with an offer of replacement insurance. In many cases, premiums for those policies were much higher.
How many people have these individual health policies anyway?
According to the Kaiser Family Foundation, about 15 million Americans are covered under individual plans.
Does the malfunctioning federal health care web site have anything to do with it?
Everything. The troubled health exchanges made it difficult to impossible for consumers who got cancellation notices to find out how much they would have to pay for new coverage and whether they qualified for subsidies. That increased the pressure on the administration to allow consumers to keep their existing health plans.
Did the president's request that states allow carriers to renew canceled policies solve the problem?
Not by a long shot. For one thing, many insurance companies are in no mood to reissue old policies when they have gone through the trouble of devising new plans that are ACA compliant. For another, states are largely responsible for the regulation of insurance sold within their borders, so it's up to each state to decide if they want to comply with the president's request.
Is there a red state-blue state divide over complying with the president's request?
Somewhat, but not in the way you might think. Some very blue states, such as Washington, New York and Massachusetts, have said no to Obama. They aren't going to allow renewals of noncompliant policies because they say it could undermine the success of the ACA. But not all blue states are taking that position. Some GOP-led states, on the other hand, are saying yes to the president because they disapproved of the ACA and its regulation of insurance carriers in the first place. Most states are still undecided.
Why aren't all Democratic-leaning states rejecting Obama's proposal?
Exchange websites in some blue states are not working as well as in others. In Hawaii and Oregon, for example, the state-run sites are still not fully functioning. Those states reason that it's not fair to deny renewals when the people in their states can't see what their new policies would look like and how much they would cost.
Why are ACA supporters worried about Obama's decision?
They believe that the people most likely to be offered renewals of relatively cheap, noncomplying policies are young, healthy Americans. If those people do not participate in the health insurance exchanges, the concern is that the premiums charged to those who do enroll – older, and less healthy people– will be insufficient to support future claims. The result would be higher rates for everyone the following year. Other supporters, however, believe the number of people who will remain outside the exchanges because of the renewals will in the end be so small that it won't really affect rates.
Why are any GOP-leaning states agreeing to extend the policies?
Here's where it gets interesting. Most of those states decided not to build their own insurance exchanges, relying instead on the federal website, which, as everyone knows, has been a mess. Some of those states — North Carolina and South Carolina, for example — have said they will allow the renewals for the same reasons Oregon and Hawaii are allowing them. Many others, however, are still talking with insurance carriers in their states and haven't reached a decision.
But there's another reason for some GOP states. Long before the cancellations bubbled up as an issue, a number of states, including Mississippi, Oklahoma, Iowa and Texas, encouraged carriers in their states to allow renewals and early renewals (for those policies that would have expired after Jan. 1) of existing policies for up to a year provided that the new terms began before the new year. By taking that step, those states essentially complied with the president's request before he made it while also keeping people off the exchanges. Other states, such as Rhode Island and Illinois, specifically prohibited early renewals, saying they violated the spirit of the ACA to provide affordable, comprehensive coverage to all.
Is there a downside for people to renew these old policies?
As the Obama administration says, many of those old policies don't have the coverage or protections of the policies sold on the exchanges. They also won't be eligible for the subsidies that are available to many of those with low and moderate incomes who shop on the exchanges.
How big a deal is this really?
Some health policy experts, such as Sabrina Corlette, project director at the Center on Health Insurance Reforms at Georgetown University, have characterized the whole cancellation issue as a “red herring.” Federal law required insurance carriers who canceled policies to offer an alternative. In many cases, Corlette said, those alternatives were priced far higher than the original policies, and that's what fueled the uproar. Obama's assurances that people could keep their old insurance didn't help.
So, how many people are really affected negatively by all this?
Very few, according to Families USA, a nonprofit organization that backs health reform. It issued a report Thursday, which said that just 1.6 million Americans under age 65 are both at risk of losing their individual policies and also ineligible for subsidies on the health exchanges.