Colorado Senator Mark Udall introduced legislation today that would allow people with individual health insurance to keep their existing policies for two more years – through the end of 2015 – regardless of any cancellation notices that have already been sent out. Udall’s Continuous Coverage Act is designed to smooth the transition to ACA-compliant plans. Udall’s bill comes after a quarter of a million Colorado residents have received notices from their health insurance carriers letting them know that their policies are not ACA compliant and will need to be replaced in 2014. The carriers are offering them alternate options, and insureds are also able to shop for coverage – with subsidies available based on income – at Connect for Health Colorado, the state’s exchange/marketplace.
The issue of policy cancellations during the transition to ACA compliant plans has been a contentious one, and the timing – right on the heels of the less-than-stellar rollout of the exchanges across the country – has been a challenge for the Obama administration. There are two very different viewpoints on the policy cancellations: Some say that the policies that are being terminated are “junk” and that their cancellation is a sign that the ACA is working to provide quality coverage for a lot more people. On the other end of the spectrum are people who are angry that their good quality coverage is being cancelled and believe that the government is overstepping its bounds by telling people that their coverage wasn’t good enough. I would say that the truth is somewhere in the middle, and there’s a lot of grey area on this one. There are certainly plenty of “Swiss cheese” policies and limited benefit plans that aren’t actually doing their insureds much good. And there are also lots of very good quality plans – like the one my family has – that do provide a good safety net in case of a serious injury or illness (which is what insurance is supposed to do) but that have out of pocket costs that are too high to be ACA compliant.
Our family opted to early renew our Anthem Blue Cross and Blue Shield plan, so we’ll be keeping it until December 2014. If Udall’s bill passes, I would say that we’d probably opt into keeping our plan until the end of 2015 too, although we’d have to compare prices again in a year to see if it still makes sense. For now, it was relatively inexpensive to lock in our current plan for another year.
If existing plans are allowed to continue for another two years, they will be insuring a closed block of insureds, with no new members joining the plan. So a year from now, the plans would be renewing in much the same way that “sunset” plans (policies that continue to be in force but are no longer sold to new members) have traditionally worked, with rates based on the health of members who have all been on the plan for at least a year (these would be plans that were in effect prior to 2014, so their initial prices were based on medical underwriting). Normally, a sunset plan has higher rate increases than other plans on the market, simply because the average length of time since medical underwriting for the members on the plan is longer than it would be for a plan that is continuously enrolling new members. And the longer it’s been since underwriting, the more likely it is that health conditions have started to arise for members on the plan.
But in this scenario, it might not work that way. Sunset plans in the pre-2014 individual market had a somewhat captive membership if their insured had developed health conditions while on the plan. Since it could be challenging to switch to a new plan once you had a pre-existing condition, many people remained on sunset plans simply because they didn’t have a choice to go elsewhere for their coverage. Now that pre-existing conditions are no longer a barrier to enrollment in the individual market, it’s possible that the renewal rates – even for a closed group – could be reasonable in 2015 for plans that are currently in force.
It’s too early to tell what will come of Udall’s bill. But I’m sure a lot of people who have individual health insurance will be watching it closely.