Healthcare law’s renewal loophole divides health insurers

Ahead of next year’s healthcare overhaul, some major insurers and consumer advocates want California lawmakers to bar companies from renewing most individual policies beyond Jan. 1.

At issue is a loophole in the federal Affordable Care Act that enables health insurers to extend existing policies for nearly all of 2014, thereby avoiding changes under the healthcare law.

Several insurance companies are promoting this idea of consumers holding on to their coverage one more year and escaping potential rate hikes tied to the massive coverage expansion. But critics fear this maneuver is merely a way for insurers to target younger and healthier people and keep them out of the broader insurance pool next year.

Their absence could leave a sicker and older population for Covered California, a state-run health insurance market opening Jan. 1, eventually driving up medical costs and premiums there.

Insurers participating in that state exchange, such as Blue Shield of California, Kaiser Permanente and Anthem Blue Cross, are lobbying state lawmakers to require individual policies to comply with the federal law by Jan. 1. California Insurance Commissioner Dave Jones opposes the idea, saying the concerns are exaggerated and consumers deserve more flexibility.

“People have been told they can keep their existing health coverage into 2014, so I am concerned about a change in state law that would undermine that,” Jones said. “There can always be winners and losers between companies. I’m concerned about changing the rules of the road now.”

Meantime, some insurers are ramping up their marketing to agents and consumers on this issue.

Connecticut-based Cigna Corp., which opted against selling in Covered California, said all of its individual and family plans would be revised to have Dec. 31 as the renewal date so that people can have the same policies in 2014.

The federal law “was written to provide folks with that option. We think our approach is pro-consumer,” Cigna spokesman Joseph Mondy said.

In a recent notice to agents, New York insurer Assurant Inc. told them to “sell certainty” and said “younger clients will see significantly higher increases than those of older clients” under the federal law.

“When you sell your customers the certainty of benefits and rates that won’t change until December 2014 your customers win — and you win, too,” the notice said. “You can turn this transition into opportunity.”

A spokeswoman for Assurant said the company “has a history of providing affordability and choice to the individual consumers we serve.”

Healthcare experts say it’s clear from this marketing that some companies are targeting younger, healthier people and shunning customers who may be costlier to insure.

“This enables non-exchange plans to cherry-pick healthy members who are currently insured with plans [that] will be participating in the exchange,” said Tom Epstein, a vice president at Blue Shield of California, one of 13 health plans selected by Covered California last month.

A spokesman for Anthem Blue Cross, a unit of industry giant WellPoint Inc., echoed those points.

“Anthem believes that there should be a level playing field between those selling individual insurance in the exchange and those who aren’t. We believe a legislative solution is a good way to reach that goal,” spokesman Darrel Ng said.

Some other states have taken steps to address this renewal issue. Illinois said it would block “arbitrary” renewals of individual policies that “violate the spirit and intent of the law that the market reforms be administered in a consistent and timely manner.”

In California, consumer advocates say they welcome having some big insurers on their side in this legislative battle.

“We are not often on the same side of the discussion,” said Anthony Wright, executive director of Health Access, a consumer advocacy group. “We recognize this is a great opportunity for shenanigans moments before the new rules come into place.”

On this issue, many critics of the health law point to President Obama’s statements in 2009 that “if you like your healthcare plan, you can keep your healthcare plan.” Administration officials say Obama was referring to “grandfathered” policies that existed before the law passed in March 2010.

Those plans don’t have to meet all the requirements of the healthcare law as long as insurers, policyholders or employers don’t make significant changes to them.

A spokesman for the U.S. Department of Health and Human Services said it “supports states’ efforts to enforce the insurance market reforms in the healthcare law, and ensure that consumers enjoy the full protections that go into effect in 2014.”

This debate over renewals doesn’t pertain to the majority of Californians who get health benefits through their employers.

Renewing an individual policy may not mean it will save money. Many lower-income people will qualify for federal premium subsidies, which will be available only when purchasing new coverage in a government-run exchange.

However, many people who are middle income or above could face higher premiums next year with no subsidies. Those premium increases are tied to federal requirements that insurers accept all applicants regardless of their medical condition and the inclusion of more comprehensive benefits.

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