‘Your health plan is canceled’: Q&A on a growing headache

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WASHINGTON — Republicans in Congress are citing the cancellation of thousands of health-insurance plans, after President Obama told Americans they could keep their policies, as a reason to delay the federal health-care law.

The cancellation notices add to the political headache for the Obama administration, which has wrestled with flaws that hobbled the Oct. 1 debut of a website created to give people access to plans under the law known as Obamacare.

“If the president knew that these letters were coming and still indicated that you could keep your health-care plan if you liked it, now that raises some serious questions about the sales job of Obamacare,” House Majority Leader Eric Cantor said Tuesday after a party leadership meeting.

House Republicans are focused on Obama’s repeated pledge that people who liked their existing coverage could keep it, as the Ways and Means Committee on Tuesday investigated the debut of the Patient Protection and Affordable Care Act.

Marilyn Tavenner, administrator for the Centers for Medicare and Medicaid, said individuals lost coverage if their insurers had changed the plans since 2010, when the law was enacted.

New plans, she said, must cover 10 essential benefits and can’t judge people for pre-existing conditions or discriminate based on gender.

“There are lots of things that are required under the Affordable Care Act that actually protect customers,” Tavenner said.

Change is a constant in the individual insurance market, she added, and about half of plans “churn” over in any given year.

Obama’s pledge about individuals keeping their plans was aimed at calming consumers worried about being forced to give up policies and doctors they liked as the program expanded coverage to many of the nation’s 48 million uninsured.

In the spring, state insurance commissioners started giving insurers the option of canceling existing individual plans for 2014, because the coverage required under Obama’s law is significantly more robust. Some states directed insurers to issue cancellations. Large employer plans that cover most workers and their families are unlikely to be affected.

In Washington state, the Office of the Insurance Commissioner in September reported receiving dozens of phone calls and emails from consumers upset by letters from their insurance carriers explaining that their current health plan will be discontinued at the end of the year.

The cancellation notices are now reaching many more policyholders across the nation, and they’ve been complaining to their lawmakers — who were grilling Tavenner on Tuesday. Here’s more on the problem:

Q: How do the policies work?

A: About 15 million people buy health-insurance policies on the individual market. That’s about 5 percent of the population. When they do so, they typically purchase a 12-month contract. And when that contract runs out, the individual can decide to no longer purchase the plan — and the insurance company can decide to no longer offer the plan.

Most people don’t stay in the individual market long: One study, published in the journal Health Affairs, found that 17 percent of individual market subscribers purchased the same plan for two straight years or longer.

There are some restrictions on how insurance companies can terminate products. HIPAA, a health law passed in the 1990s, does require insurance companies offer subscribers the opportunity to renew their policy, so long as they continue to pay monthly premiums. If they want to discontinue a subscriber’s policy, the insurance plan must provide notice of 90 days and “the option to purchase any other individual health-insurance coverage currently being offered by the issuer for individuals in that market.”

And these are the notices that insurance plans are sending out now, to hundreds of thousands of subscribers: notices saying that they do not plan to offer the policy anymore, and information about what policies will be available.

Q: So why is this happening right now?

A: Some — or maybe even most — of the plans offered on the individual insurance market right now don’t meet certain requirements in the health-care law. They may not offer preventive care without co-payment, for example, or leave out coverage of maternity care, one of the health-care law’s 10 essential benefits.

The health law allowed plans that existed in March 2010, when it became a law, to keep selling coverage. These are known as “grandfathered plans.” They don’t meet the health law’s requirements, but as long as they don’t change much, insurers can keep offering them.

Insurance companies typically do like to change their insurance plans, adjusting cost-sharing or the benefits they offer. That means that grandfathered plans have disappeared.

These cancellations are, essentially, a lot of grandfathered plans exiting the insurance marketplace. From an insurance company’s vantage point, grandfathered plans are a bit of a dead end: They can’t enroll new subscribers and are really constrained in their ability to tweak the benefit package or cost-sharing structure. There’s not a whole lot of business sense, for a managed-care company, in maintaining a health plan that doesn’t meet the health law’s new requirements.

Q: How many people are getting cancellation notices?

A: It’s hard to put an exact number on this, given that insurance plans are the ones that decide whether to continue offering an insurance product. Experts have estimated that somewhere between half and three-quarters of those who currently buy their own policies will not have the option to renew coverage, which works out to around 7 million to 12 million people.

Q: How did this happen?

A: There are lots of insurance policies, especially on the individual market, that are really bare bones. Some argue they shouldn’t even be called insurance coverage, because their coverage is too sparse to insure against financial ruin. One report from the Obama administration, issued in 2011, found that 62 percent of individual market plans don’t offer maternity care. Eighteen percent do not cover mental-health benefits and 9 percent do not pay for prescription drugs.

The health-care law requires insurance plans to cover all of those things, and then some.

This includes spending at least 80 percent of subscriber premiums on medical care (leaving 20 percent for administration and profits), covering 10 benefit categories and providing preventive care without any co-payment.

That means insurance companies cannot, under the Affordable Care Act, keep selling some of the plans that they used to sell. And that means that some people who liked purchasing coverage without maternity care and prescription drugs won’t be able to keep those plans.

The idea was to make insurance coverage more robust — and that means canceling policies that offer less-thorough coverage.

Q: What was the idea behind this?

A: The whole idea of the insurance expansion is to get Americans to purchase a specific kind of insurance, a plan that is relatively comprehensive and helps protect against financial ruin. If Americans were going to be required to buy a product, the reasoning goes, it should be one that can actually do some good.

Of course, not everyone agrees with this; some contend that shoppers should be able to continue buying less-robust insurance policies and have the option of taking on more financial risk.

Q: Does a cancellation mean I’m going uninsured?

A: Individuals with discontinued policies will have the option to purchase through the new insurance marketplaces (if they start working a little better) or they can do so outside the new marketplaces, pretty much like they have in years past.

Q: Will insurance cost more?

A: This will vary a lot from person to person. Some people who are buying a bare-bones plan right now will likely see higher premiums under the Affordable Care Act. They’ll be getting more benefits — but paying more in premiums.

Some people will get financial help buying that more robust insurance; people who earn less than 400 percent of the federal poverty line (about $45,000 for an individual) can use a tax subsidy to purchase their plan.

Compiled from The Washington Post, Bloomberg News,

Seattle Times archives and

The Associated Press

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