Earlier this month, Colorado Insurance Commissioner Marguerite Salazar sent a letter to Colorado’s Senate Minority Leader, detailing the upcoming policy cancellations in Colorado. For 18,909 plan members, these policy cancellations are the result of a voluntary decision by the carriers. For another 3,849 for SeeChange small group members, the cancellation is happening because California has issued a cease and desist order for SeeChange as a result of financial insolvency (I think we can all agree that nobody wants to continue to be covered by a carrier that is deemed to be insolvent, so maybe we should consider those 3,849 cancellations to be a public service?)
But that does still leave us with 18,909 individuals whose policies are being cancelled at the carriers’ discretion in Colorado. Not surprisingly, political candidates who are opposed to the ACA have latched onto this as evidence that the ACA is an ill-advised law. But let’s take a look at the plans that are being cancelled.
The vast majority of them – covering 17,945 people – are for Humana plans that pre-date 2014 and are thus not ACA-compliant. Humana allowed those plans to extend last fall and remain in force in 2014, but they’ve made a business decision to not do that again this fall. It’s important to note that this is Humana’s decision. HHS and Colorado’s Division of Insurance have both said that those plans could continue to exist in 2015.
Colorado is one of the majority of the states allowing “grandmothered” plans that were in force last year to be renewed again this fall into 2015. That doesn’t mean that carriers must allow their grandmothered plans to renew, but most of Colorado’s major carrier have opted to do so. Humana is the only major carrier that has chosen to cancel their old plans and have all of their policies be ACA-compliant starting in January. Ten other carriers in Colorado have chosen to allow grandmothered plans covering nearly 193,000 people to renew again into 2015.
The remaining 964 people who are receiving cancellation notices are covered by a total of three other carriers. The vast majority – 830 people – have limited benefit plans with Freedom Life, and another 126 have limited benefit plans from National Foundation Life. The other plans have policy-holder totals in the single digits, so continuing those plans would have almost certainly been a poor business decision. But back to the limited benefit plans. I won’t mince words… limited benefit plans do not provide good coverage and should NEVER be considered a substitute for real health insurance. This has always been the case. Long before the ACA, competent brokers knew to warn clients to stay far away from limited benefit plans. Some carriers opted to offer those plans, and some did not (we always preferred to work with carriers that did not). And thankfully, the ACA has established minimum standards to essentially do away with limited benefit plans (policies that qualify as fixed indemnity plans can still be sold, but starting in January, carriers will not be allowed to sell them to anyone who doesn’t also have have “minimum essential coverage” in place. That means they will only be allowed to be sold as a supplement – which is really what they are – not as stand-alone coverage).
I’ve heard people say that limited benefit plans are “better than no coverage at all” but I’m not sure I believe that. We know from talking with clients over the years that a lot of people purchase limited benefit plans without being fully aware of the limitations of the plans. They may be reassured by unscrupulous agents, or they may just neglect to read the fine print, but for one reason or another, they aren’t aware that their plans are full of holes. When they find out, it’s usually because a major claim has been filed and their “coverage” has left them with massive medical bills. In those cases, the limited benefit plans were not better than no coverage at all. Because if the people had not had any coverage at all, they might have been motivated to purchase coverage. But if they’re lulled into a false sense of security by a limited benefit plan, they have no reason to seek out real coverage until it’s too late.
As far as I’m concerned, doing away with limited benefit plans is a good thing. Those plans tended to be much less expensive than comprehensive insurance plans, and were often an attractive option for low-income households. Thanks to the ACA, those households now qualify for very significant subsidies to help them purchase real health insurance that provides a real safety net in the event of a serious medical issue. You could say that comparing limited benefit plans to ACA-compliant plans is like comparing apples to oranges… but that would be insulting to apples.
So while there are 22,000 people receiving cancellation notices this fall in Colorado, more than 3,800 of them are insured with a carrier that is financially insolvent and has been told to stop doing business (that happened in the past too – regulators shutting down insolvent carriers is not new). And about 950 people will be getting cancellation notices for limited benefit plans. There is absolutely no doubt that the new coverage they get to replace it will be far better than the limited benefit plans. If these people have household incomes under 133% of poverty ($26,321 for a family of three), they will qualify for Medicaid in Colorado. And if their income is higher than that but less than 400% of poverty ($79,160 for a family of three), they will qualify for tax credits to offset the cost of buying real health insurance.
Almost all of the remaining policy-holders who are getting cancellation notices are covered with Humana. Humana is a good quality, reputable carrier, and their grandmothered plans are not bad coverage. But Humana has made a business decision to discontinue those plans, and that is their prerogative – just as it was before the ACA. When we asked them about their decision, they noted that “many factors” were involved. But ultimately, it’s a business decision, and Humana decided that the best thing for their business was to switch to ACA-compliant plans.
Our own family is covered with an Anthem Blue Cross Blue Shield plan that is grandmothered. We opted to keep it last fall because at the time, it was dramatically less expensive for 2015 than the ACA-compliant options. We can renew it again this fall and keep it in 2015, although we haven’t decided for sure whether we’ll do that. Anthem’s grandmothered plans are increasing in price an average of 13.9% for 2015, as opposed to 0.71% for all plans across the whole individual market in Colorado. It’s to be expected that grandmothered plans will have higher-than-average rate increases, because they didn’t add any new members this year. And since Colorado HealthOP is lowering prices across most of the state, it stands to reason that the difference between the price on grandmothered plans and the lowest-cost ACA-compliant plans will be less in 2015 than it was this year. So while there are nearly 193,000 people with grandmothered plans who will be allowed to keep those plans into 2015, it’s unclear how many of those policy-holders will choose to do so.
And although carriers still have the right to stop offering certain plans or pull out of a state’s market entirely – just as they’ve always been able to do – everyone who purchases their own individual insurance now has the right (during open enrollment) to select from among the full range of options available in the individual market, regardless of medical history. This is a huge improvement, as people are no longer “stuck” with a health plan because of changes in their health. If you don’t like your plan, or if your rate is going up, know that you’ve got three months (November 15, 2014 to February 15, 2015) during which you can select any plan you want, from any carrier you want, either through the exchange or outside the exchange. If you qualify for subsidies based on your income, you’ll need to get your plan through the exchange in order to get the subsidies. If not, you can buy your plan on or off exchange – the choice is yours.
Either way, we can help you. We work with the exchange, and we also work with the carriers that are selling plans directly to consumers (in many cases, they’re the same carriers). And there is never any charge for our services. So if you’ve received a cancellation notice and you’re in need of a new policy starting in January, let us know what you’re looking for, and we’ll help you find it.