November 20, 2013

The fix is in

Discontinuation letters from insurers throw another wrench in the Obamacare rollout

The already complex Affordable Care Act has become baffling to many over the past few weeks, as several million people across the country have received letters from their insurance company notifying them that their health care plan will be discontinued next year — with elected officials scrambling to correct, or exploit, the situation.

Adding anger to such confusion is the fact that these letters flew in the face of President Barack Obama’s often-repeated claim, “If you like your plan, you can keep it.” While Obama’s claim was true for more than 90 percent of the privately insured population with coverage through their employer, that has not turned out to be the case for the roughly 5 percent who have individual or small-group coverage.

Such discontinuation letters are far from rare, but the hope was that most old plans would be grandfathered in without disruption, which did not turn out to be the case.

Amid a media frenzy last week — and bipartisan gamesmanship in Congress to address the situation — President Obama announced an administrative fix. Insurance companies would be allowed to continue their non-ACA-compliant plans next year, as long as they notified policyholders of their plan’s deficiencies and their ability to purchase insurance on the state or federal benefit exchange websites with possible subsidies to help purchase a plan.

Several problems exist with Obama’s “fix,” though. Many of these old plans are found to be worthless when someone gets sick, as consumers can be dropped from coverage or faced with bills that send them into bankruptcy or financial ruin. Additionally, while many state-run exchanges like Kentucky are running efficiently, the federal website has so far been a glitch-filled disaster where many haven’t been able to purchase a plan, though the Obama Administration says it will be fully functional by the end of this month.

There is also the question of whether insurance companies will be able or willing to continue these plans they intended to end, despite Obama’s proclamation. Some states have enacted rules to prohibit such “junk” plans — whose negative consequences the law sought to phase out — while some insurance companies may not have the time or inclination to continue them by the end of the year.

Here in Kentucky, where 280,000 individual and small-group policyholders have received discontinuation letters from their insurer, Gov. Steve Beshear has given the green light for insurance companies to continue such non-ACA-compliant plans next year, though the jury is still out on whether they will take him up on the offer.

Sharon Clark, commissioner of Kentucky’s Department of Insurance, tells LEO that she spoke with the four insurance companies with current plans in Kentucky on Monday, outlining their options on continuing coverage they had not planned on. Clark says the deadline for their decision is Friday, and she is expecting a mixed reaction to the offer.

“If I had to speculate, I’d say at least two probably will not (continue their old plans),” says Clark. “And I think there’s the possibility we could have one or two to do so. Part of it depends on their current presence in the state, if they have the ability to do so, or if it’s worthwhile. They have some big decisions to make.”

Clark says that insurers in Kentucky are in a better position to change course and continue plans than in most other states, as Kentucky allowed early renewal for insurers, who have already processed forms and rate filings.

Rep. John Yarmuth, a strong supporter of the ACA, welcomes the Obama Administration fix for those who received discontinuation letters, but warned in a press release last week that those wanting to keep their old plans will not receive the consumer protections under the law, “meaning they could still be denied insurance renewal because of a pre-existing condition, face medical bankruptcy due to annual and lifetime limits, or face higher premiums because of their gender or health status.”

Yarmuth says Kentucky is fortunate to have a well-functioning state benefit exchange website (Kynect.com) where this slice of consumers — about 6 percent of the population — can find quality, affordable coverage, but the clunky federal website remains an issue for those who live in a state that didn’t create their own exchange.

Regan Hunt, executive director of the health care advocacy group Kentucky Voices for Health, hopes that even if insurance companies in Kentucky continue offering old plans, consumers will still shop for coverage on the Kynect site.

“If people stick with their current plan, the insurer could all of a sudden decide to terminate their coverage if they develop cancer or something along those lines, unlike the new plans available,” says Hunt. “People are hearing all of the negative stuff about the federal exchange not working, but they need to know we’re not having that problem in Kentucky. To someone who’s not familiar with that, it might be easier to just sign a piece of paper and say, ‘I’ll keep what I have,’ and not really think about what that truly means.”

Almost 9,000 Kentuckians have enrolled in private coverage through Kynect since Oct. 1, with more than 39,000 now enrolled in Medicaid. From the experience of the Massachusetts law that Obamacare is based on, most are expected to sign up near the deadline, which is Dec. 15, to be covered starting next year, and March 31 to avoid a penalty.

In Congress last week, a bill sponsored by Rep. Fred Upton, R-Michigan, passed the House that sought to fix the ACA by gutting it, allowing new individuals to purchase non-ACA-compliant “junk” plans, which would drain the exchanges of healthy customers, driving up premiums. The bill appears to be hopeless in the Senate, as most assume the Obama Administration fix will be the plan going forward. Rep. Yarmuth and most ACA supporters say that while the continuation of non-ACA-complaint plans is a risk for those who choose to keep them, they are not large enough in numbers to hurt the exchanges.

Sen. Mitch McConnell attacked Obama’s fix last week, saying the only real fix is to repeal Obamacare “root and branch.” Such an act would also jeopardize the ability of 40 million uninsured Americans — and 640,000 Kentuckians — to now purchase insurance or sign up for Medicaid through the exchange, without fear of discrimination, coverage being dropped or bankruptcy.

Those numbers obviously dwarf the amount of people receiving discontinuation letters, who now wait to see if they can continue their old coverage or shop for a more comprehensive plan.

 

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