Cancelled policies and the Affordable Care Act
Matt Paul | 02.20.14
(Harrisburg) -- The tumultuous rollout of the federal Affordable Care Act hit a fever pitch last fall when millions of Americans, and tens of thousands of Pennsylvanians, received notice their individual insurance policies were being terminated.
It highlighted a year of unprecedented change in Pennsylvania's insurance market, the 14th largest in the world.
State Insurance Commissioner Michael Consedine says his department is working to minimize disruptions as ACA provisions take effect.
"We continue to be very focused on making sure that Pennsylvanians do understand what their options are both inside and outside of the exchange," he says.
The two worlds collided in late fall, when an estimated quarter million Pennsylvanians with individual policies received cancellation notices in the mail.
There are two reasons for that, according to Aji Abraham, senior vice president of business development at Capital Blue Cross. First, rates can no longer be based on a customer's health status, which was common in the individual marketplace before the federal overhaul. Second, he says, the law mandates ten essential health benefits, whether a customer wants them or not.
"For example, a male has to buy a policy that covers maternity even though -- theoretically -- the male should never need the benefit," Abraham explains. "As a result, a lot of the policies that people bought, pre-PPACA, were no longer compliant with the law once PPACA went into effect."
Journalists and politicians quickly picked up on policyholders' consternation, and by mid-November President Obama had announced customers could keep those plans for up to a year, if state insurance commissioners and insurance companies agreed to it.
Insurance Commissioner Michael Consedine
Commissioner Consedine says his department worked with insurers to ensure consumers had options.
"Our best intelligence is that most of those people ended up either continuing their current policies, or were automatically transferred into a new policy," he says.
At Capital Blue Cross, Aji Abraham says the affected individual policies were extended through March, without a rate increase, to allow enough time for customers to find new coverage via the insurance exchange.
"Our goal was to try and make this transition as easy as possible for folks, because, at the end of the day, it really wasn't their fault that their policy was no longer viable, for lack of a better word," says Abraham.
But whether it's already happened, it's next month or next year -- these consumers will eventually transition to policies that are fundamentally different in a post-ACA world.
The Urban Institute and Robert Wood Johnson Foundation undertook an analysis of the canceled insurance policies, comparing them to options on the new exchange.
Linda Blumberg, a senior fellow in the Urban Institute's Health Policy Center, says most people who are eligible for subsidies on the exchange are going to find a better deal, financially. She contends that even those who aren't eligible for subsidies, because their income is above 400 percent of the federal poverty level, may still be able to save money in the new marketplace.
Without subsidies, she says the lowest-cost silver -- or mid-tier -- plans on Pennsylvania's exchange average between $176 and $472, depending on age. That could be an unexpected increase for younger, healthier people -- but Blumberg urges a broader view of the impacts.
"Under the Affordable Care Act, as you go through those life transitions and things happen to you -- either by aging or by bad luck -- my premiums are not going to reflect that, they're going to stay at this predictable, affordable level and I know I'm always going to be able to access befits that are going to be necessary for me to get the care that I need.
In its title, the report Blumberg helped write asks the question, "Will Those With Cancelled Insurance Policies Be Better Off in ACA Marketplaces?"
With the benefit of foresight, she thinks they will.