Q&A: Canceled Insurance Policies May Be Restored
By Lisa Zamosky
Reviewed by Sarah Goodell
Nov. 18, 2013 -- Under a policy shift announced by President Obama this week, insurance companies will be allowed to renew several million health insurance policies they had canceled or were planning to cancel by the end of 2013.
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The policies in question don't cover the range of benefits required by the Affordable Care Act starting Jan. 1, 2014. That's when most health plans have to cover 10 essential health benefits, such as hospitalizations, prescription drugs, mental health services, and maternity. The plans also must have a limit on how much people have to spend out of pocket for the year.
Many plans sold on the private market in recent years don't meet those requirements.
If you're covered by one of these plans, you might have received a notice from your insurer telling you that it's being discontinued.
Here, WebMD answers questions about what this policy shift means to you.
How many people are affected by this?
Roughly 15 million people buy their own health insurance on the private market. It's tough to pin down an exact number, but it's estimated that about half are getting cancellation notices, says Dylan Roby, director of health economics and evaluation research at the UCLA Center for Health Policy Research.
Does this mean I can definitely keep my current plan?
First, state insurance commissioners have to give insurers the green light. Soon after President Obama announced his plan, Washington state's insurance commissioner said he will not allow companies to renew current health plans into 2014.
Jim Donelon, president of the National Association of Insurance Commissioners and insurance commissioner for Louisiana, also expressed concern with Obama's plan. "This decision continues different rules for different policies and threatens to undermine the new market."
In addition, a handful of states passed laws that would require insurers to end all plans that don't comply with the Affordable Care Act by the end of this year. Even if officials wanted to allow insurers to go along with Obama's proposal, state law would prevent it.
Other state insurance commissioners have signaled their support. Florida, Kentucky, and Ohio, for example, will allow late renewals.
If state insurance commissioners agree, it's then up to the insurance companies to decide whether to reverse the cancellations. That's not an easy task, given the late date. According to Roby, that would require "a lot of effort for a temporary stay" on the part of insurance companies.
Still, he says, insurers may face a lot of pressure from customers interested in holding onto the plan they have.
If I got a cancellation notice, what should I do?
To start, Roby says, "pay attention to what the insurance commissioner is saying in your state" about whether insurers will be allowed to renew the plans they initially canceled. You also can call your insurance company directly to find out if it intends to renew policies.
Consider all your options before making a final choice. Some insurers sent cancellation notices that recommend only their own alternative plans without explaining that you have other options.
You may qualify for tax credits to lower your insurance cost if you buy coverage through your state's Marketplace. Even people whose income is too high to qualify for credits may find a better deal by shopping around.
My insurer already sent a letter saying I could renew my current plan as long as I do so by the end of the year. What does this change?
Most states had allowed insurers to renew existing health plans for 1 year as long as they did it by Dec. 31, 2013. Those plans don't have to comply with all of the law's new protections and benefits.
While insurers did renew some of those policies, they canceled other policies that don't meet the law's new standards.
Another complication is that health plans sold on the private market renew at different times. The president's plan allows insurers to extend policies set to renew by the end of this year into 2014. Policies with renewal dates in 2014 could remain in place into 2015.
If my insurer gives me the option to keep my old plan, should I take it?
It depends. To figure out your best course of action, you should carefully compare your old plan to new ones on the details of price, out-of-pocket costs, and the benefits covered.
You can choose to continue with your current insurance policy or shop for a new one through your state's health insurance Marketplace or outside the Marketplace.
Insurers that decide to reverse the cancellations must send you a notification letter. The letter also must explain the new benefits your current plan lacks, and your right to buy insurance both on and off the new health insurance Marketplace. It must also explain that you may qualify for tax credits that could lower your insurance costs for plans bought through the Marketplace.
Insurers also will be able to raise rates for renewed policies.
What effect will this have on the new insurance market?
That is not yet clear. One insurance leader says that reversing the cancellations will disrupt the market. Her view is shared by many in the industry.
Karen Ignagni, president of America's Health Insurance Plans, released a statement warning that changing the rules now could cause costs to rise.
"Premiums have already been set for next year based on an assumption of when consumers will be transitioning to the new Marketplace. If now fewer younger and healthier people choose to purchase coverage in the Exchange, premiums will increase and there will be fewer choices for consumers."
SOURCES: CMS Commissioner Letter. Dylan Roby, director of health economics and evaluation research, UCLA Center for Health Policy Research. Health Affairs: "Implementing Health Reform: An 'Administrative Fix' For Policy Cancellations."