When the drafters of the Affordable Care Act began working on a health reform law, there was a principle underpinning their goals: If they were going to make people buy insurance, they needed to make sure the insurance was worth buying. That meant covering the most important benefits and not charging older or sicker people exorbitant amounts.
What the White House announced today, under political pressure, is a temporary step back from that policy stance. The Obama administration will allow insurance companies to renew policies that do not meet health law standards through the end of 2014, senior White House officials told reporters on a call this morning.
And whether or not this quells the current political battle over cancellation notices, it is nearly certain to create a big mess for insurance companies and the state officials who regulate them.
"It’s just a big mess right now. . . . I don't know what to tell people,” Kansas Insurance Commissioner Sandy Praeger told The Washington Post.
Under current law, insurance plans did have the option of "early renewing" policies in 2013. This would mean reaching out to a consumer who had a plan that would run out, say, in June, and giving them the option to renew in December 2013. Because the insurance policy was sold in 2013 — before Obamacare's more cumbersome regulations kicked in — that plan would have the go-ahead to be out of compliance with health law requirements.
Under the change that the administration is announcing this morning, the hypothetical Americans with a policy that ends in June 2014 would have the option to renew that same plan for one more year, if their insurance company decides to provide that option.
Keep in mind, this change is not ordering insurers to offer their products for another year; health plans regularly take their offerings on and off the market. Instead, it's a very nice ask on the part of the administration, to insurance carriers and regulators, to play ball on this one.
Insurers who do take the White House up on this option would have to do two things: notify consumers of the various health law benefits missing from the plan, and let them know about the other options they would have on the health law's marketplace.
"Under the old law, if I had bought a plan starting June 1, 2013, then the insurance company would have to no longer offer that plan," one White House official told me. "Now, that can go for another year."
The idea, senior White House officials say, is to create a smoother transition from the pre-Obamacare market to the post-Obamacare landscape. The fix proposed here is less sweeping than what House Republicans have proposed: It will only allow people who are already signed up for these pre-Obamacare plans to keep buying them. Under the Upton proposal, anyone who wanted to could enroll in one of these pre-Obamacare plans.
For insurance regulators and health insurance carriers, though, this supposed glide path is about to create a whole bunch of headaches. They have been expecting, for years now, that these insurance plans would be phased out of the market in 2014 — and have planned accordingly.
Here's how Robert Laszewksi, an insurance consultant, put it in a note to clients earlier this morning:
This means that the insurance companies have 32 days to reprogram their computer systems for policies, rates, and eligibility, send notices to the policyholders via US Mail, send a very complex letter that describes just what the differences are between specific policies and Obamacare compliant plans, ask the consumer for their decision — and give them a reasonable time to make that decision — and then enter those decisions back into their systems without creating massive billing, claim payment, and provider eligibility list mistakes.
All by January 1.
There's also worry, among health policy wonks, that allowing people to stay on these plans will be bad for the new insurance marketplaces. Anyone who enrolls in one of these pre-Obamacare plans will be kept in a separate "risk pool," meaning that their premiums are set based on their smaller group. Everyone who buys an Obamacare-compliant plan is put in a different risk pool.
The concern here is that healthier people are more likely to stay in these pre-Obamacare plans; they're probably more okay with a skimpier benefit package. And that could drive up premiums in the new Obamacare markets. A short-term fix, in other words, could become a longer-term problem for the president's health-care law.
"This puts the insurance companies," Laszewski writes, "who have successfully complied with the law, in a hell of a mess."