The Obama administration's latest two-year extension of health plans that don't comply with Obamacare requirements once again puts the fate of the health care law in states’ hands.
The administration's decision, announced Wednesday, won't mean anything in the states that reject the latest extension because they ultimately have control over their insurance markets.
Old health plans that didn’t have special grandfathered status under Obamacare were supposed to expire at the end of 2013, when the law’s major insurance market reforms took effect. Then the controversy over policy cancellations erupted last year, and the administration sought out a political fix. It’s also one that leaves state regulators wrestling with a serious policy decision.
The pre-Obamacare health plans, which may have skimpier coverage than the law now requires, are generally cheaper, so healthier people may be drawn to stick with those. As state insurance regulators ponder another extension, their general fear is effectively creating separate pools for healthy and sick people.
"Creating two tiers of plans - the compliant and non-compliant – could result in higher premiums overall and market disruptions in 2015 and beyond," said North Dakota Insurance Commissioner Adam Hamm, who's president of the national group representing his colleagues.
When the administration first decided in November to allow non-compliant health plans to be extended through 2014, about half the states agreed to implement the policy shift. Those states again must decide whether they'll go along with the White House’s fix for the next two years.
The following map from America's Health Insurance Plans offers a recent glimpse of where states stand on the extensions for 2014. You'll see that some states yet haven't made a clear decision on the extensions for 2014, let alone 2015 and 2016.
Joel Ario, a former Obama administration health official who oversaw exchanges, said states that allowed the non-grandfathered health plans in 2014 are not necessarily a lock to extend them through 2016.
"The presumption would be against doing this if you're trying to make the ACA work. That's the starting point," said Ario, also a former insurance commissioner in Oregon and Pennsylvania.
The number of non-compliant plans is relatively small. HHS says it's around 1.5 million, and that number should only come down over the next two years since the administration's policy only allows renewals, not new sales.
Ario said some regulators may figure that the pool of people in non-compliant plans is so small it's not worth the administrative burden. Still, he expects that "more often than not," states that already extended the non-compliant plans will do so again.
Insurance commissioners, with just a couple of exceptions, haven't yet said how they’ll handle the new extension.
Kansas Insurance Commissioner Sandy Praeger, a Republican who's supportive of the health care law, announced Thursday that she'd allow insurers to extend the old health plans through 2016. After allowing them to continue in 2014, Praeger said she has some concerns about the latest extension. Ultimately, though, she agreed to it after talking with insurers.
"Earlier, the department and the companies believed it was in the best interest to phase out non-compliant ACA plans at the end of 2014, but with the new announcement we acknowledge the administration's decision and will comply with the flexibility provided under the extension,” she said in a statement.
When the Obama administration in November announced the first extension of non-grandfathered plans, it took Washington State Insurance Commissioner Mike Kreidler just three hours to reject the policy. He just as quickly made clear on Wednesday that the latest extension won’t apply to Washington state.
"Advocates and health insurers continue to support my decision," said Kreidler, a Democrat, in a statement. "They understand that allowing previously cancelled plans to continue would only raise premiums for everyone and would greatly disrupt the competitive market that we are building in Washington."