The Truth Behind Those Cancelled Insurance Policies

In the weeks since the launch of the Healthcare.gov website, Republicans have been pointing out to whoever will listen about the obvious failure of the Affordable Care Act since the website wasn’t working as it should. While the technical launch was indeed a misfire, they ignored the obvious fact that a functioning website had little to do with the actual law, especially since many countries have successfully managed their healthcare systems without the help of a website.

Nevertheless, the president went on national television and announced that he would personally oversee the immediate overhaul and would make sure it was functioning right away. This past weekend the site was relaunched, with almost a million people having visited without incident.

Around the same time, reports were surfacing about policyholders receiving cancellation notices from their insurance companies. These customers were irate because they were being forced into more expensive policies, some claiming that it would now force them to go without insurance. Plus, they really liked their policy and President Obama promised them they could keep their policy if they liked it.

Just like technical issues with websites, cancelled insurance policies are quite common. Health insurers sell a product. The ACA requires that these policies maintain a minimum standard. In order to meet those standards, insurance companies must recalibrate their product in order to be in compliance.

Put simply, the cancelling of insurance policies is capitalism at its finest.

Since the signing of the law in 2010, insurance companies have been preparing for next year’s new landscape. In the interim, policies have been slowly adding the mandated features. Six months after the law’s passage, adult children could stay on their parents’ policy until age 26 and children could not be denied coverage because of preexisting conditions. Other enhancements, including removal of annual and lifetime benefit caps, preventative care and birth control provided without co-pay have already been put into effect.

During this time, some policies were “grandfathered” meaning they would be allowed to continue without providing some of the new requirements. Others were canceled, as insurance companies felt it made more sense to simply transfer customers into compliant policies. They also continued to raise premiums.

Now that the ACA is enrolling customers, non-compliant policies, including grandfathered ones, are being discontinued in 2014. These policies may include so-called “catastrophic” policies that were low in premium cost and basically only useful if there was a major medical need. These policies often didn’t cover basic care, like annual exams. It would be difficult for an insurance company to bring these policies into compliance without significantly increasing premiums far beyond what many states would consider reasonable.

So they took them off the market.

Since denying people coverage due to preexisting conditions is no longer allowed, everyone can qualify for insurance. Customers can now go into new policies offered by their insurance company, including low cost catastrophic plans that are now required to cover preventative care (though only those under 30 can do so), or go to a different company. They can also search other insurance companies via their state’s exchange or through the newly revamped exchange run by the federal government. It is through these exchanges that customers can find out if they are eligible for subsidies.

Whether or not they can afford it is a different question.

One key part of the ACA is the expansion of Medicaid to those whose incomes are at or below 133 percent of the poverty level. When the Supreme Court ruled in 2012 that the ACA was indeed constitutional, it also ruled that the federal government could not require states to expand Medicaid coverage, causing many to opt out. This has created a coverage gap of people that are not eligible for Medicaid, but also do not qualify for subsidies.

Twenty-five states have refused to expand Medicaid coverage, affecting approximately five million people. Several more do not allow adults without children on Medicaid. Most of these people were previously uninsured. Some had the low cost, non-compliant policies that are now no longer available. Private insurance in these non-expansion states are running about 15 percent higher than average. This leaves them without an affordable option.

This isn’t about capitalism. It’s about politics.

All of the states that have refused to expand Medicaid coverage are run by Republicans. They are also the same states that are refusing to run their own exchanges, opting instead to send people to the glitchy website, so they can have hearings about how hard it is for everyone to signup for the health insurance they don’t want them to have.

In response, President Obama made an announcement in late November that insurers could extend the grandfathered, non-compliant policies for another year. They cannot sell them to new customers, but current policyholders can remain. He has left the decision up to the states as to whether or not they will allow insurers to do so.

This “fix” could cause more harm than good. This can cause problems for insurers who are trying to stay in compliance with the law and states that are trying to keep costs down. California, whose state exchange has averaged more than 10,000 individual applications a day, was the first to announce that they would not allow non-compliant policies to extend past the end of this year. Thus far 10 states have agreed to allow the extension, five of which are states that run their own exchanges.

There could be hundreds of thousands of people remaining in policies that are less comprehensive than compliant policies. This could cause numerous issues for insurance companies and policy holders when it comes to coverage. All of which is happening because opponents have purposely sabotaged the policy since its creation.

With the website working, and thousands of people signing up daily, opponents will be looking for new ways to make the law seem like it’s not working. Perhaps they’ll spend the next year saying the ACA isn’t working because some policies don’t have the same coverage.

It is an election year, after all.