I frequently come across FAQs on various websites with a question along the lines of: “Do I have to switch to a new health insurance plan if I like my existing one?” And almost always, the answer is something like this: “No. The ACA allows grandfathered health insurance plans to continue unchanged, so if your plan was in effect when the ACA was signed into law on March 23, 2010 and has not been significantly changed since then, it will be considered “qualified coverage” and you can keep it”.
This is frustrating to read, because I’m sure that people who aren’t familiar with the details of health care reform might just see that first word – no – and not pay attention to the significant caveat that follows it. Adding to the confusion is the partially true statement President Obama made in 2009, saying “If you like your health care plan, you will be able to keep your health care plan. Period. No one will take it away. No matter what.”
The problem is that people who currently have health insurance might think that they can keep their plan – even if they’re not on a grandfathered plan – because there’s a lot of confusion about what exactly a grandfathered plan is. In 2012, just under half of people who get their health insurance from an employer were on a grandfathered plan, but that number is dropping and will continue to do so as plans change. There’s no way to know whether your health plan is grandfathered without calling your carrier and asking. A plan that was grandfathered as of 2011 might not be so today, since changes to the plan can happen at any time and can cause a plan to lose its grandfathered status.
The really bad health insurance plan that I wrote about earlier this year might be a grandfathered plan that was in effect when the ACA was signed into law (although that still doesn’t explain how they’re still marketing the plan to new members, or the $5 million lifetime max that was being marketed on that plan as of this year – even grandfathered plans are not allowed to have lifetime maximums).
But especially in the individual market, health plans are constantly being redesigned. The way the process works in Colorado – and in many other states – is that existing plans are retired, or “sunset” and new ones are introduced. In most cases, insureds are allowed to remain on the sunset plan. If the carrier does away with the plan completely, they have to offer the plan’s insureds the option to purchase any of the other plans the company offers, guaranteed issue. So most carriers have traditionally let insureds remain on sunset plans, but the plan becomes a closed block, which means that no new insureds are being added to the pool. The result is usually that over time, premiums within a closed block start to rise faster than premiums in other plans that are enrolling new members (keep in mind that in the individual market, medical underwriting has long been used to make sure that new members are relatively healthy. So for individual plans, members who have been on the plan the longest tend to have higher claims expenses than new members). This leads healthy insureds who are on sunset plans to seek coverage in another plan in order to lower their rates.
There are lots of reasons for new plan designs: It’s a way for carriers to create product differentiation (especially true in robust markets like we have in Colorado). New plan designs also allow carriers to create products with lower premiums, as they’re well aware that price is one of the most important factors when consumers are shopping for coverage (a good example is the trend over the past decade towards health plans with separate prescription deductibles instead of integrated Rx deductibles or Rx coverage with traditional copays). New plan designs also allow carriers to respond to market pressure and consumer preferences. Whatever the reason, new plan designs are common.
If you have an individual health insurance policy, you’ll receive communication directly from your carrier in the next few weeks, detailing your options going forward. Many carriers are allowing insureds to switch to a December 2013 effective date in order to keep their existing plan throughout most of 2014 (until it renews, at which point it will have to become ACA-compliant). This might be a very good option for people who like their current plan, have a policy with a high deductible, and won’t qualify for subsidies in the exchange, as it will give them one more year of lower premiums before they transition to an ACA-compliant plan (which will have more comprehensive coverage, but will also be more expensive for people who don’t qualify for subsidies).
In summary, be sure to carefully read any communication you get from your health insurance carrier this fall. Anyone who buys individual health insurance has access to the exchange plans during open enrollment starting October 1, and people who will qualify for subsidies are likely to find that the exchange is their best option. On the other hand, people who don’t qualify for subsidies might find that buying or renewing a 2013 plan before the end of the year gives them another year of lower-priced coverage that fits their needs. But it’s unlikely that many people with individual plans will just be able to keep their policy indefinitely.