California Considers Its Options On Canceled Insurance Plans

November 15, 2013

President Barack Obama’s announcement Thursday that insurers can extend cancelled policies that don’t comply with the health law has prompted conflicting reactions from California insurance regulators and the companies they oversee.

State Insurance Commissioner Dave Jones said he will urge companies to let more than a million consumers keep their plans for an additional year, fulfilling the president’s promise that people didn’t have to switch policies if they didn’t want to. “The federal government told people in California and throughout the United States that they could stay in their plans,” he said at a press conference Thursday.

But the lobbying group for health plans said its members shouldn’t extend policies that don’t meet the requirements of the Affordable Care Act. The state should “stay the course and transition people into more comprehensive policies,” said Patrick Johnston, chief executive officer of the California Association of Health Plans.

The cancellation notices have caused anger and frustration among consumers and led to growing criticism of Obama and the law.

Covered California, the state’s new insurance marketplace, has contracts with health insurers who sell plans through the state-run website, requiring them to cancel policies by the end of 2013 that don’t cover benefits such as prescription drugs, hospitalizations and maternity care. Marketplace officials are trying to determine whether those contracts – and state law -- allow any changes to be made and what impact those changes would have on consumers next year.

“We don’t know right off the cuff at this point what the impacts will be,” said Covered California spokesman Dana Howard. “We will be working intensely with the regulators and the policymakers, as well the health plans, as to how best to fulfill the president’s guidance.”

California is unusual in that it has two agencies that oversee health insurance: the Department of Insurance, led by Jones, regulates primarily non-managed care products, and the Department of Managed Health Care oversees managed care plans, the vast majority of California policies. Neither has the authority under state law to order insurance companies to rescind their cancellation notices.

The managed health care department’s director Brent Barnhart said his staff was analyzing the president’s announcement. “Our priority,” he said, “continues to be protecting consumers and preserving the stability of California’s private health care coverage market.”

Jamie Court, the president of the advocacy group Consumer Watchdog said Covered California should change their contracts and allow insurers to extend the policies for consumers who want them. “It is hard for Covered California to ignore the president,” said Court.

Insurance companies said they are weighing what to do with their individual policies. Blue Shield of California spokesman Stephen Shivinksy said in a statement that the company is working with state regulators and Covered California to understand the implications of the White House announcement.

Kaiser Permanente also said it is reviewing the proposal and trying to learn more details from state regulators. “Our common goal should be to minimize any unintended effects, and avoid – as much as possible – further disruption for individuals and families who are already seeing significant change as a result of health care reform,” a company statement read. (Kaiser Health News is not affiliated with Kaiser Permanente.)

Johnston of the California Association of Health Plans said that if consumers keep their current policies, the Covered California exchange could become unbalanced with older, sicker people. “The entire underlying premise of the ACA – balancing costs of the young, old, sick and healthy – has been left adrift with this announcement,” he said.

Jones, the insurance commissioner, brushed off those concerns.

“If you look at the cancellation notices, they steer their customers into non-exchange products,” he said.

Obama said insurance companies that extend their policies must inform policyholders what’s missing in the plans and what other options they have under the new exchanges.

Jones has already compelled two of the biggest companies to temporarily extend their plans for more than 200,000 customers because of defects in the cancellation notices.

Anthony Wright, executive director of the consumer group Health Access California, said even if consumers can extend their plans, that doesn’t mean that they should. Many of the individual plans don’t meet the health law’s standards, and if consumers get sick, their insurance may not pay for their care.

“There are, in many cases, better and even cheaper plans available, especially in Covered California,” he said. “They should take a close look and consider those options.”

agorman@kff.org | svarney@kff.org

Blue Shield of California Foundation supports KHN coverage of California.

Kaiser Health News is an editorially independent program of the Henry J. Kaiser Family Foundation, a nonprofit, nonpartisan health policy research and communications organization not affiliated with Kaiser Permanente.

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