The White House announced an “administrative fix” on Thursday that will allow insurers to continue offering their 2013 individual health care plans in 2014 without complying with the Affordable Care Act’s minimum benefit standards. Issuers that choose to renew their existing or already-cancelled policies will also be required to send detailed notices to consumers informing them that they could receive more comprehensive plans and additional consumer protections through the law’s marketplaces.
The announcement comes just one day before the House of Representatives is scheduled to vote on a similar legislative “fix” offered by Rep. Fred Upton (R-MI), although that bill would go further, permitting insurers to sell existing coverage to new enrollees. The legislation has attracted considerable Democratic support.
Administration officials conceded during a call with reporters that some insurers may ignore the additional federal flexibility and continue to cancel policies, while state commissioners could also refuse to comply with the change. Insurers have argued that they would face significant technical and logistic difficulties in re-instating already cancelled policies and Obama officials say that they have not secured guarantees from state insurance regulators to implement the change. In most states, insurers have already had the option of renewing policies early through 2014, but have chosen not to do so.
“Basically, the Administration is expanding the early renewal option that insurers in most states had – it expands the pool of people enrolled in early renewal plans because it includes people who have already received cancellations and then extends the renewal through the end of the calendar year, as opposed to the fall of 2014 in most cases,” Edwin Park, Vice President for Health Policy at the Center for Budget and Policy Priorities, said.
Responding to criticism that the proposal could keep younger and healthier applicants in their current plans and out of the exchanges — thus increasing premiums in the law’s marketplaces — the officials argued that individuals have traditionally remained in the individuals market for only a short period of time and claimed that it contains older individuals. A senior administration official pointed to data showing that 40 percent of beneficiaries in the individual market are between the ages of 45 and 64 and that just a quarter or less are under the age of 26. The administration also plans to re-evaluate the effectiveness of the law’s “risk adjustment” tools, which are designed to spread risk among health care insurers and stabilize the health care market in the first two years of reform.
But health policy experts argue that churn in the individual market will dissipate with the implementation of the individual mandate and claim that an older demographic does not necessarily translate into sicker applicants. “It again depends on the health status not as much on age, if older and sicker go to the exchanges and older and healthier stay outside,” premiums in the exchanges will eventually increase, Park said.
HHS is relying on its enforcement discretion to implement the fix, the same authority the administration used to institute deferred action for some undocumented immigrants. Officials described the fix as “a temporary policy” that may be extended “depending on circumstances.”
Some insurers are already indicating they will go along with the administration’s “fix.” According to Sen. Bill Nelson (D-FL), Florida insurance officials have said they will cooperate.
AHIP, a group that represents insurers, on Obama’s proposal:
Changing the rules after health plans have already met the requirements of the law could destabilize the market and result in higher premiums for consumers. Premiums have already been set for next year based on an assumption of when consumers will be transitioning to the new marketplace. If now fewer younger and healthier people choose to purchase coverage in the exchange, premiums will increase and there will be fewer choices for consumers. Additional steps must be taken to stabilize the marketplace and mitigate the adverse impact on consumers.
The Washington insurance commissioner has rejected the flexibility:
Obama fix rejected by Washington State insurance commissioner: "I do not believe his proposal is a good deal"
— Jamie Dupree (@jamiedupree) November 14, 2013
Here is the full statement.