Why are Insurance Companies Canceling Health Plans
So many cancelled health plans, are being reported since October 1, 2013. In the last week multiple news outlets and reporters are reporting many individuals who purchased individual health insurance plans are now receiving letters form their insurance providers stating their policies will be cancelled. In addition to the letter, the quotes for the new plans are significantly higher. While for most this is shocking especially the price, this is something that has been known at least three years by most health insurance experts, and anyone who read the detail of the legislation.
It goes something like this…
In 2009 when the president was campaigning for the Affordable Care Act he stated, “…if you like your health plan, you will be able to keep your health plan…”
That statement is true for the majority of Americans (80-90%) who receive a plan from their employer, however individuals purchasing individual plans on the exchange are directly impacted and that statement is misleading. When the law was sign in March 2010 it had a grandfather clause to all current existing policies prior to March 23, 2010, even if they weren’t in compliance with the law. However In July 2010, the Department of Health and Human Services rewrote some of the regulations stating if significant parts of the policy were altered, it could not be grandfathered and would have to comply with the new rules put in place by the Affordable Care Act.
Any new plan being offered by a Health Insurance Provider must meet the Minimum Essential Health Benefits. Essential health benefits must include items and services within at least the following 10 categories: ambulatory patient services, emergency services, hospitalization, maternity and newborn care, mental health and substance use disorder services, including behavioral health treatment, prescription drugs, rehabilitative and habilitative services and devices, laboratory services, preventive and wellness services, chronic disease management, and pediatric services including oral and vision care.
Insurance policies must cover these benefits in order to be certified and offered in the Health Insurance Marketplace. States expanding their Medicaid programs must provide these benefits to people newly eligible for Medicaid.
Due to the new additional services health plan providers are required to provide with each new plan many consumers are experiencing sticker shock over the premiums that will be charged on their new policies. Early estimate from an NBC news article quotes as many as 7 million to 10.5 million may have their previous policies cancelled due to non-compliance.
Kaiser health news network: Florida Blue, for example, is terminating about 300,000 policies, about 80 percent of its individual policies in the state. Kaiser Permanente in California has sent notices to 160,000 people – about half of its individual business in the state. Insurer Highmark in Pittsburgh is dropping about 20 percent of its individual market customers, while Independence Blue Cross, the major insurer in Philadelphia, is dropping about 45 percent.
However advocacy groups and further research are finding these policy cancellations are not all the fault of Obamacare as many have been pushed to believe. Take the two examples: Independence and Highmark have begun cancelling plans called “guaranteed issue” policies. These plans were sold to customers who had pre-existing medical conditions when they signed up for insurance. However policyholders with standard policies and had health problems are being provided options to extend their coverage through next year. Through this process some insurance companies are kicking out, or pricing out, their most expensive and unhealthy costumers and keeping the healthy ones.
While the insurance companies that are committing this practice have denied the allegations, it is very difficult to decipher which issues are related to Obamacare, and which issues and practices are being blamed on the roll-out.