President Obama announced an administrative fix on Thursday that he says would allow some Americans receiving cancellation notices to keep their current plans. But the administration is late to this game. A growing number of lawmakers have already introduced bills that aim to preserve existing insurance policies.
Some of those proposals are displayed in the table below. They differ in length of grandfather period, whether the plans can accept new enrollees, cancel policies, and require issuers to inform beneficiaries about the benefits they’ll find in Obamacare:
Ultimately, there is no fixing the cancellation issue if your policy goal is to move beneficiaries from less comprehensive policies into more comprehensive policies. Since Obamacare establishes a federal minimum standard all plans have to meet, people enrolled in plans that don’t meet that threshold will eventually have to abandon them.
For lawmakers and policyholders, the key questions are when and at what cost. Obama and Upton would give individuals approximately a year to transition into Obamacare plans, Udall provides for two, and Landrieu would let you keep your insurance for as long as you’d like. But there is a catch: maintaining healthier people in their existing plans — either by requiring insurers to continue offering current policies or giving them that option — means they can’t be part of the marketplaces, as the law had originally envisioned, and insurers anticipated when they calculated premiums for 2014. Keeping this population out of the law could cause some insurers to reassess their rates — others could leave the exchanges altogether. The premiums for 2015 — which would be revealed in 2014 — would almost certainly increase as a result.
Meanwhile, companies that have already cancelled certain individual policies would struggle to reverse their decisions. They would need to reprogram computers and file new rates for approval. Many say that the task is simply impossible.
However, insurers that do maintain their policies (or are forced to do so by state insurance commissioners) could benefit handsomely from Upton’s bill. He would allow grandfathered policies to enroll new beneficiaries or effectively cherry pick the healthiest and youngest beneficiaries — worsening the marketplaces’ adverse selection problem.
The only proposal that appears to address the risk pool issue is Udall’s. The Colorado senator would exempt existing individual policies from most of the law’s new benefit standards but require them to implement community rating, charging everyone the same price for coverage.
Existing policies would be able to maintain their current benefit and cost structures for two years. But they would be subsumed into the risk pool of the rest of the marketplaces, stabilizing that risk pool. Some subsection of healthy enrollees may have to pay a higher community rated premium and as a result could be more likely to purchase coverage from the new marketplaces.
Incidentally, insurers and insurance commissioners — who are busily telling reporters that keeping healthy people on existing plans would undermine the exchanges — are much more comfortable with Udall’s approach.
The House will hold the very first vote on this issue on Friday, where Democrats are expected to offer yet another alternative proposal.