How Insurers May Successfully Dodge Obamacare’s Consumer Protections For Another Year

The Los Angeles Times reports that several large health insurers plan to take advantage of an Obamacare loophole that allows them to renew individual policyholders’ current health plans for up to a year without having to conform to Obamacare’s consumer protections and market reforms. That move would lead to uneven implementation of the landmark reform law in its nascent stages, and could drive up prices for other Americans purchasing insurance through the 2014 Obamacare marketplaces.

Insurers offering their customers the option to renew their current coverage could wind up not having to fully comply with Obamacare until well into 2014, depending on the month that the plan was issued. This gives insurers an extension on implementing important reforms to their plans, such as Obamacare’s ban on annual and lifetime benefit caps. While that could be advantageous for certain individual policyholders — mostly the healthier population — reform advocates fear that it will inevitably lead to cherry-picking that shifts costs onto the broader pool of Americans:

Some policy experts are expressing concern about this practice for fear that insurers will focus on renewing younger and healthier policyholders and hold them out of the broader insurance pool next year. Their absence could leave a sicker and older population in new government insurance exchanges, driving up medical costs and premiums there.

“This could undermine the Affordable Care Act, and it opens the door for exacerbating potential rate shock in the exchanges,” said Christine Monahan, a senior analyst at Georgetown University’s Health Policy Institute. “The health insurers can cherry-pick some healthy people and it raises prices for everyone else.” […]

If an insurer offers this option, it would then be up to consumers to decide whether they want to renew an existing policy into 2014. The length of any renewal may depend on what month their annual plan year begins. […]

Renewing an older policy could mean forgoing some of those richer benefits and new limits on out-of-pocket medical expenses.

So far, large insurers are split on whether or not they will take advantage of this loophole. UnitedHealth Group hedged on their intentions to the Times; WellPoint — which runs Blue Cross plans in many states — said that its approach would differ from state-to-state; Kaiser Permanente was the only large provider to explicitly state that it would not renew existing plans beyond January 1, 2014.


Insurers choosing to take advantage of the loophole are simply delaying the inevitable, and will cause significant damage to sicker or poorer Americans without individual policies in the process. That’s why certain states, including California and Oregon, are considering taking legislative action to prevent or substantially limit such dodges by health insurers. As Oregon Insurance Commissioner Louis Savage — whose office issued a rule in the state barring any extension beyond March 31, 2014 — told the Times, “We want to get as many people as possible into the exchange. I think having renewals go deep into 2014 is counterproductive to the goals of the federal healthcare law.”