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Your Policy Is Cancelled: Insurers End Coverage That Falls Short of Affordable Care Act

| October 21, 2013

She just got cancelled. (Brian Smithson)

She just got cancelled. (Brian Smithson)

Health plans are sending hundreds of thousands of cancellation letters to people who buy their own coverage, frustrating some consumers who want to keep what they have and forcing others to buy more costly policies.

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The main reason insurers offer is that the policies fall short of what the Affordable Care Act requires starting Jan. 1. Most are ending policies sold after the law passed in March 2010.  At least a few are cancelling plans sold to people with pre-existing medical conditions.

By all accounts, the new policies will offer consumers better coverage, in some cases, for comparable cost — especially after the inclusion of federal subsidies for those who qualify. The law requires policies sold in the individual market to cover 10 “essential” benefits, such as prescription drugs, mental health treatment and maternity care. In addition, insurers cannot reject people with medical problems or charge them higher prices. The policies must also cap consumers’ annual expenses at levels lower than many plans sold before the new rules.

But the cancellation notices, which began arriving in August, have shocked many consumers in light of President Barack Obama’s promise that people could keep their plans if they liked them.

“I don’t feel like I need to change, but I have to,” said Jeff Learned, a television editor in Los Angeles, who must find a new plan for his teenage daughter, who has a health condition that has required multiple surgeries.

An estimated 14 million people purchase their own coverage because they don’t get it through their jobs. Calls to insurers in several states showed that many have sent notices.

Florida Blue, for example, is terminating about 300,000 policies, about 80 percent of its individual policies in the state. Kaiser Permanente in California has sent notices to 160,000 people – about half of its individual business in the state.  Insurer Highmark in Pittsburgh is dropping about 20 percent of its individual market customers, while Independence Blue Cross, the major insurer in Philadelphia, is dropping about 45 percent.

Some Policies Targeted

Both Independence and Highmark are cancelling so-called “guaranteed issue” policies, which had been sold to customers who had pre-existing medical conditions when they signed up. Policyholders with regular policies because they did not have health problems will be given an option to extend their coverage through next year.

Consumer advocates say such cancellations raise concerns that companies may be targeting their most costly enrollees.

They may be “doing this as an opportunity to push their populations into the exchange and purge their systems” of policyholders they no longer want, said Jerry Flanagan, an attorney with the advocacy group Consumer Watchdog in California.

Insurers deny that, saying they are encouraging existing customers to re-enroll in their new plans.

“We continue to cover people with all types of health conditions,” said Highmark spokeswoman Kristin Ash.

She said some policyholders who may have faced limited coverage for their medical conditions will get new plans with “richer benefits” and the policies “in most cases, will be at a lower rate.”

Paula Sunshine, vice president of marketing with Independence, said the insurer hopes the cancelled policyholders will “choose Blue when they decide on a new plan.”

Higher Costs?

Some receiving cancellations say it looks like their costs will go up, despite studies projecting that about half of all enrollees will get income-based subsidies.

Kris Malean, 56, lives outside Seattle, and has a health policy that costs $390 a month with a $2,500 deductible and a $10,000 in potential out-of-pocket costs for such things as doctor visits, drug costs or hospital care.

As a replacement, Regence BlueShield is offering her a plan for $79 more a month with a deductible twice as large as what she pays now, but which limits her potential out-of-pocket costs to $6,250 a year, including the deductible.

“My impression was …there would be a lot more choice, driving some of the rates down,” said Malean, who does not believe she is eligible for a subsidy.

Regence spokeswoman Rachelle Cunningham said the new plans offer consumers broader benefits, which “in many cases translate into higher costs.”

“The arithmetic is inescapable,” said Patrick Johnston, chief executive officer of the California Association of Health Plans. Costs must be spread, so while some consumers will see their premiums drop, others will pay more — “no matter what people in Washington say.”

Health insurance experts say new prices will vary and much depends on where a person lives, their age and the type of policy they decide to buy.  Some, including young people and those with skimpy or high-deductible plans, may see an increase. Others, including those with health problems or who buy coverage with higher deductibles than they have now, may see lower premiums.

Blue Shield of California sent roughly 119,000 cancellation notices out in mid-September, about 60 percent of its individual business.  About two-thirds of those policyholders will see rate increases in their new policies, said spokesman Steve Shivinsky.

Like other insurers, the Blue Shield letters let customers know they have to make a decision by Dec. 31 or they will automatically be enrolled in a recommended plan.

“There is going to be a certain amount of churn in the marketplace as people have to make their decisions,” Shivinsky said.

–Anna Gorman and Julie Appleby, Kaiser Health News

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10 Responses for “Your Policy Is Cancelled: Insurers End Coverage That Falls Short of Affordable Care Act”

  1. Genie says:

    Should everyone have access to insurance? Of course. What bothers me here is that, to those floundering under this stressful economy, being forced to spend several hundred dollars a month is going to be difficult, at best. You can’t magically make that money appear every month if you don’t have it in your budget.

    And while there are going to be subsidies available, the unknown here is how many will not be eligible for these subsidies.

    I wish they would delay the penalties to families for at least 3 years, while this shakes out. It is the citizens who are going to be footing this bill for the most part. These families don’t deserve to be penalized while they work things out.

    If Congress really wants to make this affordable, this will give them the opportunity to find out if that is the case.

  2. Reaganomicon says:

    Get ready for all sorts of asinine behavior from companies that but the bottom line way ahead of employees. A few weeks back I was talking to a friend that works for Sodexo, the company that runs the cafeterias at DSC. Even though she and most ofher fellow employees are full time, Sodexo is dropping their health care because they work 9 month instead of 12 month contracts, with the exception of management. Since the pay is abysimal (around minimum wage) most of the employees there work for the benefits, because they are older. And now those are cut.

    It would probably fit DSC’s community image better if they went shopping for an employee-friendly alternate to run the cafeterias, but I suspect they won’t.

  3. A.S.F. says:

    Although our policy was not due to be renewed until January of 2014, my husband and I were told by BC/BS Carefirst (which my doctor has now dubbed, “Care Less”) that we either had to renew our policy with a 36% increase or face being terminated. I do not blame the Affordable Health Care Act (or President Obama) for this. This is a case of the insurance industry scrambling to make up for perceived lost profits in the future by scaring people into renewing at increased rates now. Most insurance companies feel much more beholden to their companies shareholders than they do to their subscribers. This goes for non-profits as well, who look to their borad of Directors//Trustees for management contracts and compensation. In times of change, amid the chaos, there will always be those willing to exploit the situation for an extra buck in their pocket now, especially if they fear the end of their accustomed gravy train is coming. Instead of wasting efforts on trying to defund or destroy healthcare reform, we should be putting pressure on those who would take advantage of the need for necessary change and use it to line their pockets even more. This is what our government must be vigilant about and protect us from.

    • Anonymous says:

      This is why companies are having trouble keeping the insurance. The law requires policies sold in the individual market to cover 10 “essential” benefits, such as prescription drugs, mental health treatment and maternity care. In addition, insurers cannot reject people with medical problems or charge them higher prices. The policies must also cap consumers’ annual expenses at levels lower than many plans sold before the new rules.

      The cost is to high to pass on to the employee. The insurance companies have to raise the rates. They are being forced to have more of a basic coverage.

  4. Anonymous says:

    My Blue Cross insurance that cost less than $100 a month now jumps to $640 a month which is not affordable. This is the BS that they sold the public to pass Obamacare.

  5. Sherry Epley says:

    The title of this article is quite misleading. Hopefully everyone will read all the details.

    I see this as evidence that our insurance companies have been “cherry picking” their approved policyholders for decades. I was a health care underwriter for a major carrier for 11 years, and I can assure you that it was my job to do everything I could to REJECT the higher risk applicants and maximize profits for my employer. By higher risk, I mean even those with very common ailments such as being more than 30 lbs over weight or having high blood pressure, etc.

    The Obamacare regulations unfortunately cannot control the premium rates charged by the insurance carriers, but they do require a HIGHER quality of coverage which means that our citizens will pay less for actual treatment, even if not for insurance premiums.

    For those who keep saying that our twice elected President doesn’t compromise, remember Obamacare IS a huge COMPROMISE! President Obama wanted a “public option” similar to Medicare. A public option would have put controls not only on insurance premiums, but on our outrageous health care treatment costs for doctors, hospitals, pharmaceuticals and tests, etc. Those industries are very profitable and make many people very wealthy. . . therefore, the Republicans in Congress would not allow the “public option”. . . as their wealthy constituants (AKA campaign contributors) would not be happy. Hopefully, many voters are starting to see beyond the propaganda to the connection of those dots.

    Websites and software are much more easily fixed than broken bodies. Let’s not throw out Obamacare. . . let’s make it better and better for each of us!

  6. Sherry Epley says:

    OK. . . does any intelligent person really believe that the “let’s delay Obamacare” propaganda is anything but an attempt to keep it from being fully implemented until President Obama is out of office?

    If the full implementation of Obamacare was delayed for 3 years (how convenient is that number?), the Tea Party would then possibly have a chance to repeal what is already the law of the land. . . as confirmed by the Supreme Court. In addition, our insurance companies would literally go out of business if the new regulations required them to pay for much better benefits, but without requiring everyone (even the healthy people) to pay for health insurance. Think this through, it is fiscally impossible for insurance companies to survive if people only buy the coverage when they are sick.

  7. concerned says:

    With Obama care and health care requirements businesses have found a way not to have to pay into it. If you are a part time employee you are getting your hours cut to 25 hours a week max. I know of a few local buissness that have already done this. To me this us a $200 dollar a month in take home pay. Multiply that by the thousands of people barley making it localy earn part time wages and we have ourselves a new economicccrisis.

  8. A.S.F. says:

    I can vouch for Sherry Epley’s experiences with health insurance companies. When I worked as a Social Worker in a hospital that provided Behavioral Health services, part of my job was to review cases with insurance companies to get permission for services to commence or continue. I had one instance where a suicidal man was denied hospitalization because (I kid you not) he did not have a gun pointed at his head at the time I was evaluating him in the ER even though he had just been brought in by paramedics after being holed up for over two hours in his home with a gun to his head before that. The ER doctor wanted to send him home with an outpatient referral when the insurance turned down our request to put him inpatient. I asked the hospital to consider a “social admission” (admitting someone without insurance authorization, even if the hospital ends up eating the cost.) I was granted my request after I pointed out to the hospital administrator that I would be ethically bound to document, in writing, both my requests to the insurance company and the hospital and their subsequent refusals. I , then, recommended to the family that they contact the state insurance commissioner about the situation, which they did. The insurance company was then forced to pay the hospital, after the case was reviewed. This is the kind of stuff that, unfortunately, goes on under the present system. Someone should not be turned away for vital, life-saving services simply because they have lousy insurance, are at the mercy of a faceless reviewer on the phone who knows less than anybody else about what is actually going on, or because the patient suffers from a stigmatized illness, such as an addiction or mental health problem. These are the kinds of areas in which I look forward to seeing changes. If I have to pay a little more for that, I am willing to do so. But I am not so content to see greedy companies, that have been so used to getting away with murder that they think they are forever entitled to do so, milk a precarious situation for all it is worth, for as long as they can.

  9. rhweir says:

    I voted for Obama twice. He has hung out the independent health insurance buyer who is less than 400% of the FPL, out to dry. My wife’s independent policy is going up. My pension plan health insurance is going up because the feds cut the ERRP funding for it. It seems we’re not poor enough, yet, for Mr Obama’s help but we’re heading there, we’re heading there. I wish I had those votes back. For 43 years I voted the straight Democratic ticket but now, I’m an independent. Way to go Bama!

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