Want to reverse Obamacare’s cancellations? Then you’re going to have to raise premiums.

November 13, 2013
Brendan Smialowski/Getty Images
Brendan Smialowski/Getty Images

Welcome to Health Reform Watch, Sarah Kliff’s regular look at how the Affordable Care Act is changing the American health-care system — and being changed by it. You can reach Sarah with questions, comments and suggestions here. Check back every Monday, Wednesday and Friday afternoon for the latest edition or sign up here to receive it straight to your inbox. read previous columns here.

From President Clinton to legislators on both sides of the aisle, lots of people are calling on Obama right now to deliver on a key health law promise: If you like your health insurance plan, you can keep it.

But health policy experts across Washington a little bit befuddled about how, exactly, that would work in practice.

"I've been sitting here trying to think this through" Sara Rosenbaum, a professor at George Washington University, told me when I reached her at her office.

"That's like the parlor game right now," Sabrina Corlette, a health policy researcher at Georgetown University, says. "We've been noodling it over a lot."

I canvassed a half-dozen health policy experts Tuesday about whether it would be possible to reverse or address the cancellation notices sent out to an estimated 7 million to 12 million Americans.

The consensus seemed to be this: Yes, there are potential solutions. But they entail painful trade offs. And yes, it would be messy for the health care law.

"There's a lot of harm doing the things you might do," says Sara Lueck, a health policy analyst at the Center for Budget and Policy Priorities. "There's just so many potentially bad effects for the insurance exchanges."

Two options


We're talking about a slightly different type of grandfathers here.  (Photo by Susan Biddle for The Washington Post)

The health-care law puts new regulations on any plan offered in the individual market beginning in January 2014. This includes ending discrimination against individuals with pre-existing conditions and ensuring all plans cover a basic set of benefits. Most insurers on the individual market do not currently meet these standards.

This has left health plans with two options: They could eliminate these products and offer current customers new products that comply with the health-care law -- the "cancellation" option. Or, they could hold onto non-compliant plans under the "grandfathering" clause, which allows insurance plans that pre-date the health law to continue covering their membership so long as they don't change the policy.

Insurance plans that chose the former option sent their subscribers a cancellation notice that said their policy would no longer be offered in 2014. If lawmakers want to reverse those, health-policy experts offered two options.

One would be changing the definition of what counts as a "grandfathered plan," and this is what legislation offered by Ways and Means Chair Rep. Fred Upton (R-Mich.) and, separately, by Sen. Mary Landreiu (D-La.) would do. They would deem any plans that in effect in January 2013 as "grandfathered," meaning they would not have to hew to the health law's new standards. Upton's legislation would also allow those plans to enroll new members, something that grandfathered plans are currently barred from doing.

Keep in mind, these 2013 plans wouldn't have to accept everyone: A grandfathered plan is not required to adhere to the health law's guaranteed issue provision. And the worry here, on the part of health law supporters, is that these plans would steal away all the healthy people and leave the insurance marketplaces with sicker subscribers. The result could be higher prices in the exchanges.

The White House, for its part, hasn't been totally clear about whether it would veto such legislation. When pressed on the legislation last week, White House Press Secretary Jay Carney said he hadn't yet read the bill.

“You have loosely described a proposal that I haven’t read and I’m not sure is on paper,” he told reporters. “So, for me to issue a statement on administration policy about it, I think would be getting a little ahead of myself.”

The second idea wouldn't require any legislation at all, but rather encouraging insurers to better publicize "early renewals." If a consumer renews a non-compliant policy before January, they're in the clear to keep it for one calendar year. A policy renewed for Dec. 1, for example, can stick around until November 30, 2014.

Corlette pointed out to me that some people getting cancellation notices are actually told about this option; even though their policy won't be offered in 2014, they still get a chance to buy it for a second time in 2013.

"They typically give the consumer three options: renew early, buy another one of our policies or jump to the exchange," she says.

You can see that in a cancellation letter from BlueCross BlueShield of Texas, posted to the Tumblr, My Cancellation. "The health insurance policy you have now will be discontinued effective November 30, 2013 and you will be provided with a new policy with a December 1 renewal date," that Aug. 28 letter reads. "The main difference is the new policy will allow you to keep your benefits until December 2014."

"I imagine that insurance companies could, if the state regulator did not object, say that we are willing to renew your coverage in 2013," says Tim Jost, a law professor at Washington and Lee University. "They could say let us know as of December if you want to renew your coverage for another year."

This is not true, however, in a handful of states: About six have decided to disallow these early enrollments because they could pose a threat to the health care law's stability. And that, then, brings us to a challenge that any reversal of cancellations will near-certainly encounter.

Higher premiums

What price a buggy website? (Photo by Mike Segar/Reuters)
(Photo by Mike Segar/Reuters)

Any plans that are grandfathered - as these uncancelled plans would have to be - are kept financially separate from literally all other plans offered in the post-health law marketplace. Pre-Obamacare plans are put into what's known as a separate "risk pool." That means insurance companies can set premiums based just on how healthy or sick people are in this specific plan.

And since these are people insurers have decided to enroll, you can bet they tend to be a healthy bunch.

Everyone who gets insurance in an Obamacare-compliant plan would be in a different risk pool. Since those products have to take any applicants, they would likely have higher premiums.

"What they would allow the issuer to do is carve up the risk pool based on healthy and sick," Corlette says. "Because the sicker people would be in the guaranteed issue market, over time you'd end up in the typical insurance death spiral."

The health care law does include some guards against a death spiral for the first few years. Because of those policies, some experts think that premiums would only go up a little bit if you left more people in the grandfathered market--and that would be a worthwhile price to pay for ending a political headache.

"I understand the risk pool problem, but what we're talking about is that premiums will be somewhat higher than they otherwise would have been," says GWU's Rosenbaum. "I don't know preventing that is worth the onslaught you're seeing right now."

Of course, there is one administrative fix that a few health policy experts see as a possible fix, without the downsides of grandfathering additional plans: Getting HealthCare.gov up and running. That would allow some people worried about cancellation notices to know how much it would cost to purchase a plan through the new marketplaces.

"Are there things that could be done administratively?" Corlette asked rhetorically. "Yeah, fix the Web site!"

KLIFF NOTES: Top health policy reads from around the Web.

HealthCare.gov is unlikely to be fixed by Nov. 30. "Software problems with the federal online health insurance marketplace, especially in handling high volumes, are proving so stubborn that the system is unlikely to work fully by the end of the month as the White House has promised, according to an official with knowledge of the project." Amy Goldstein, Juliet Eilperin and Lena H. Sun in the Washington Post.

Meet Michael Cannon, one of the key Obamacare obstructionists. "Cannon is a health care policy expert at the libertarian Cato Institute. He is engaging and sharp-witted. He is also an avowed opponent of the Affordable Care Act, and has for several years now been embarked on a legal crusade that, while a ways from triumphing, may have inadvertently played an outsized role in suppressing the number of states setting up their own exchanges, thereby greatly confounding the law’s implementation." Alec MacGillis in The New Republic.

The makings of the Obamacare management failure. "The notion that Obama wasn’t clued in seems to defy logic, given the warning signs from both within the administration and outside it, the importance of the law’s success to his presidency and his own understanding of the power of technology. But ever since the troubled launch, administration officials have tried to keep Obama as far as possible from the debacle, describing him as engaged in the implementation but unaware of the depth of the website issues." Carrie Budoff-Brown in Politico.

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Neil Irwin | November 13, 2013