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Vorys Health Care Advisors

What does the President’s announcement about continuing canceled health insurance policies really mean?

Posted in Affordable Care Act

Responding to the concerns of many Americans regarding a potential cancellation of some health insurance policies, President Obama announced on Thursday that insurance companies can continue to offer for another year some health plans to individuals, families, and small businesses that do not meet the Essential Health Benefits requirements established under the Affordable Care Act (ACA).

As we reported in a recent blog post, beginning in 2014, Medicaid plans and small group and individual plans sold inside and outside of the Health Insurance Marketplace must cover a package of 10 categories of items and services known as Essential Health Benefits (EHBs).  These categories include:

  1. Ambulatory patient services
  2. Emergency services
  3. Hospitalization
  4. Maternity and newborn care
  5. Mental and/or substance use disorder services, including treatment of behavioral disorders
  6. Prescription drugs
  7. Rehabilitative and habilitative services and devices
  8. Laboratory services
  9. Preventive and wellness services and chronic disease management
  10. Pediatric services, including oral and vision care

The President’s announcement was spurred by some individuals receiving cancellation notices for health insurance policies they currently have.  These are plans that will not meet EHB requirements.

  • The policies at issue are individual and family policies purchased directly from insurers.
  • Consumers covered by Medicaid, Medicare, or large employers are unaffected.
  • The administration is also allowing extension of small-employer plans that do not meet EHB requirements.
  • Qualified health plans sold in the Marketplace must continue to cover EHBs.

The policy change will allow insurers to extend these existing “noncompliant” plans for one more year for current customers.  Policies renewing before the end of this year will last until late 2014 and policies that expire in 2014 can extend into 2015.  If carriers do renew, they must disclose to the policyholder differences between the benefits offered in their existing plan and those EHBs required by the ACA.  In other words, why the policy is “noncompliant” with the EHB requirements.

As reported by The Washington Post:

Individual policies have long been a problematic part of the insurance market, with higher prices than most group plans, fewer benefits and a tendency to cut off people when they get sick. The health-care law tried to address this problem by directing Americans who rely on individual policies to buy coverage through the new insurance marketplaces — and by defining the set of essential benefits.

Despite the policy change, the administration is allowing each state to determine whether its residents can renew a plan that does not comply with the ACA’s EHB requirement.  Some states, including Washington, have already announced that they will not allow noncompliant health insurance policies to be sold to their residents.  Other states, such as Florida, have announced that they will allow noncompliant insurance plans to be renewed for their residents.

Additionally, an insurance company is not required to renew its noncompliant policy.  So although a consumer may want to renew a policy that will not cover EHBs, the state may not allow it and/or the insurance company itself may not continue the policy.  Consumers should check with their state to see if it will allow renewal of noncompliant plans.  They should also check with their insurer to see if it will be renewing canceled policies.

Even if the state and the insurance company will allow the renewal of a noncompliant plan, consumers should evaluate alternatives offered in the Marketplace to see if qualified health plans sold there offer better coverage at equal or better price.

Remember that individuals earning between 100% and 400% of the federal poverty level (FPL) ($23,550 to $94,200 for a family of four) will have access to premium tax credits in order to make purchasing insurance in the Marketplace more affordable.  Additionally, individuals earning between 100% and 250% FPL  ($23,550 and $58,875 for a family of four) will have access to cost-sharing subsidies that will bring down their deductibles, copayments, and coinsurance.  By contrast, noncompliant plans are not eligible for subsidies.

In summary, while you may now be able to keep your plan that does not include EHBs, when you compare plans in the Marketplace, you may find that you will get an equal or better price for a better benefit than what you have now.