Home > Employee Benefits > Extensions for individual policies under the ACA: Will it really help?

Extensions for individual policies under the ACA: Will it really help?

websiteLast week, under political pressure to save his historic legacy health care legislation, President Obama announced a one-year extension for insurance policies that were due to be canceled in 2014. Rather than smoothing out the already rippled waters caused by the difficulties of the Exchange roll out, the latest move may have opened the floodgates for more disruption and confusion.

State regulators and insurance companies have been developing plans to meet the Affordable Health Care (ACA) rules for the last three years, and overnight the game has changed. State regulators (who are a key group in deciding the direction the extensions will take) were not kept in the loop and were simply caught off-guard by the latest announcement. Questions and concerns now abound over this unforeseen and surprising announcement by the President.

  • Fear exists among insurance carriers that President Obama’s “fix” for policies canceled under his healthcare reform law could create new problems and lead to an increase in premiums.
  • Insurance company actuaries had set prices for the Exchange plans based on a mix of young, healthy individuals and older, unhealthier participants. Now, there is a good chance that healthy members, whose participation in the Exchange programs is essential to the overall cost stability, will attempt to keep their current plans – leaving more high risk individuals in the Exchange and the potential for increased prices.
  • If insurance companies end up losing money, it may be the government that foots the bill under a little-known part of the ACA called the “risk corridor”. This is a revenue sharing provision where insurance companies share the cost of more expensive members. But if more money is paid out than is collected, the government foots the bill. The Risk Corridor, which was established assuming an overall favorable financial outcome of the Exchanges, could end up costing the government tens of millions or even hundreds of millions of dollars, and might become another political football.
  • Reversing cancellations is not an easy task. It involves developing new pricing, filing plans and giving consumers ample notice that these plans are available. In addition, insurers must outline the differences between their plans and the Exchange Plans. With a December 15th deadline looming for individuals to purchase plans on the Exchange, is there enough time for all of this to happen?
  • Do State Insurance Commissioners have to act to comply with an Executive order? Right now it seems they do not. Some states will not allow changes at this point (including MA, RI, VT, NY, WA) while others will give insurance companies a chance to continue cancelled plans (including FL, NC, OH, TX, KY). It is apparent that a common message is not forthcoming, which only adds to the frustration we are seeing now.

There is a feeling by many that the latest Obama move is only a stopgap measure and that the same issues and concerns will need to be addressed again next year. During this time of uncertainty, is reversing cancellations just a move that’s too late in the game? Will this create even more confusion and more harm than good? Since the damage was already done, would it have been a better and more stable strategy to just move on?

The discussion is far from over, and as debate over healthcare reform plays on, Americans will have to wait before the answers to these questions become clear.

About the Author

David Martin is a Vice President in the Employee Benefits Group at William Gallagher Associates. He specializes in working with mid- to-large size companies in all areas of employee benefit plan design, funding, compliance, administration and communications.

617.646.0350 | Dmartin@wgains.com | Connect with David on LinkedIn

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