How states are deciding whether to accept Obama’s cancellation ‘fix’

November 15, 2013

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 uphere to receive it straight to your inbox. read previous columns here.

Introducing: Health Reform Watch's Fix Tracker! 

President Obama has asked states to allow insurance companies to renew non-Obamacare compliant plans through 2014. We'll be using this tracker to keep a running list of how states are deciding. A more thorough version of this tracker exists here. And let us know if your state is missing!

Allowing late renewals: Ohio, Fla., Ky.

Not allowing late renewals: Ariz., Wash., Vt.

Still deciding: Calif., Colo., D.C., Ind., Miss., Ore., S.D.

(Photo by Jonathan Alcorn/Reuters)
(Jonathan Alcorn/Reuters)

President Obama wants insurance plans to give shoppers the option to renew their current health plan in 2014, even if it's not Obamacare compliant.

There's a key group of bureaucrats standing between the president and that policy outcome: 50 state insurance commissioners.

State insurance commissioners are arguably the most powerful bureaucrats you've never heard of. They already played a key role in the health law's rollout, writing the regulation that determines what insurance companies are, and are not, allowed to spend consumer premiums on.

Over the next few weeks, we'll be keeping an eye on the decisions state regulators make. So it seemed to make sense Friday, to weigh some of the factors that could lead them in either direction.

"Most of them are in the driver's seat on enforcing these new rules," says Sarah Lueck, a consumer representative to the National Association of Insurance Commissioners. She walked me through some of the factors that regulators are likely to be weighing right now.

The case against extending insurance renewals

The whole point of the health-care law was to eliminate insurance plans that didn't offer robust enough coverage. Giving these plans another year on the market would be a step backward from that policy goal -- not to mention a logistical nightmare.

There's definitely a policy debate to be had over whether it's a good idea to eliminate skimpier insurance products. But there's not much argument about whether that was the idea behind the health-care law. The wave of insurance cancellations happening right now is a feature of the law; not a bug.

This is why you see a really liberal insurance commissioner like Washington's Mike Kreidler putting out a pretty fierce statement blocking these plans from staying in his marketplace.

"In the interest of keeping the consumer protections we have enacted and ensuring that we keep health insurance costs down for all consumers, we are staying the course," he said in a Thursday statement.

There's also worry that this change could disrupt the health law's insurance exchanges, keeping the young and healthy people who currently buy individual market coverage in a separate risk pool. With an exchange population that's older and sicker, that would likely have the effect of making premiums there more expensive.

Then, there's a pure logistics issue: It's really late in the game to make these kinds of changes to insurance policies that could be offered just six weeks from now.

"These insurance departments don't typically have a huge staff," Lueck says. "This could be somewhat labor intensive, and that's probably on some people's minds."

The case for extending renewals

As the president noted in Thursday's address, the health law's rollout hasn't exactly gone as planned. Quite the opposite, it has been a big mess. Lots of people who want to look at prices on the marketplace can't, and we're now six weeks into the open enrollment period.

If the rollout had gone smoother, you could imagine insurance regulators directing consumers to the health insurance marketplaces if they received a cancellation notice. There, they'd be able to look at the price of health insurance premiums and decide whether they could find a better deal.

Most insurance regulators, though, can't do that right now: 36 states use the federal marketplace, HealthCare.gov, that is still running into significant technical problems. If states aren't confident that the marketplace will be up and running soon -- and there's at least some reason to doubt that it will -- then there's a stronger case to let people keep their current policies.

States, too, have faced the political pressures that the federal government has in getting in consumer demands for a fix.

"That's a big part of it: To what extent do you feel there's enough people who are effected by cancellations who can't get something to replace it with?" Lueck said. "If they had something that they could replace it with, then I think a lot of the concern will go away."

There's also a not insignificant number of states out there where regulators would prefer these type of plans be in the market, as they give consumers a less expensive option. They're getting less, but also paying less. For them, this could be one way to keep these options on the market just a little bit longer.

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

Obama is meeting with insurance CEOs this afternoon. "Senior White House officials, including Obama's chief of staff, Denis McDonough, have met twice with insurance industry executives since the Oct. 1 launch of the federal marketplace to discuss its problematic rollout, and the administration consulted with some insurance companies on the president's proposal before he announced it Thursday. But the sudden decision to convene a meeting between the president and health care chief executives highlights both the level of anxiety within the insurance industry about the administration's policy fix and the many questions that remain about how it will be carried out." Juliet Eilperin in The Washington Post

There are three important tweaks in the Obama plan to 'fix' cancellations. "Obamacare includes a series of shock absorbers designed to protect insurers from precisely this possibility—since, among other things, insurers who lose money in 2014 will charge higher premiums in 2015. One of them, known as “risk corridors,” essentially reimburses plans for half of significant losses. (This paper from Milliman can explain how they work.) In its official letter to state insurance commissioners, HHS says it will "explore ways to modify the risk corridor program final rules to provide additional assistance." What might that mean? One possibility would be allowing insurers to get extra money if they incur extra losses because of this change." Jonathan Cohn in the New Republic.

California is in a bit of a mess over the 'fix.' "The California marketplace, Covered California, has required insurance companies to terminate their non-compliant plans by Dec. 31, 2013, if they want to sell there. So that's set up a showdown of sorts over the 'fix' between Covered California and the state insurance commissioner, Dave Jones, who told reporters Thursday that he opposed Covered California's cancellation policy from the start." Dylan Scott in Talking Points Memo.

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