California Grapples with the Prospect of Not Cancelling Policies

notcancelledPresident Obama announced that the administration will allow states to reverse health insurance cancellations that were set to go into effect December 31. Insurance Commissioner Dave Jones is asking California health insurers and HMOs to allow customers to renew non-grandfathered policies for 2014. Jones said, “The President’s action makes it crystal clear that health insurers and HMOs are not required by federal law to cancel existing policies. California has more than 1 million people with non-grandfathered policies facing cancellation; they should be given the opportunity to keep their existing coverage next year. I am calling on all health insurers in California to let their policyholders keep their existing coverage for an additional year if they want it.”

At a press conference in San Francisco, Jones said that health insurers in California had decided to cancel individual plans, but not group plans. They are allowing small businesses to renew their existing policies for another year although those policies don’t comply with the new 2014 requirement.

Commissioner Jones also called on Covered California to release health insurers from a contract provision that requires them to cancel plans for individual policyholders on December 31. Jones said, “Over my objections, Covered California required health insurers participating in the Exchange to cancel all non-grandfathered individual policies on December 31.” Recently Jones persuaded Anthem Blue Cross and Blue Shield to delay the December 31 policy cancellations for individual and family (non-grandfathered) policies.

The American Academy of Actuaries’ warns that allowing states to reverse health insurance cancellations could lead to higher average medical spending among those purchasing new coverage, additional program costs for the federal government, and higher health insurance premiums in 2015. Cori Uccello, the Academy’s senior health fellow says that changing the ACA provisions could alter the dynamics of the insurance market, creating two parallel markets operating under different rules.

He said that allowing consumers to retain cancelled plans could affect the composition of health insurance risk pools. In particular, if lower-cost individuals keep their coverage, and higher-cost individuals move to new coverage, the medical spending for those purchasing new coverage could be higher than expected. He added that premiums approved for 2014 may not cover the cost of providing benefits for an enrollee population that has higher claims than anticipated in the premium calculations. Insurers cannot increase premiums in future years to make up for prior losses. However, assumptions about the composition of the risk pool would reflect plan experience in 2014., DOI

Last Updated 11/25/2020

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