Administrative Fix for Canceled Exchange Plans Could Raise Rates

The Obama administration's administrative fix for plans that were set to be canceled under the Affordable Care Act is expected to drive up premiums in states that implemented the proposed solution, Politico reports (Norman, Politico, 8/13).

Background

In November 2013, Obama announced a plan that would allow insurers in 2014 to continue selling insurance plans even if they do not meet the law's requirements.

Under the fix, insurers are allowed to continue selling such health policies, but they are required to inform consumers that more comprehensive coverage options might be available in the ACA's insurance exchanges. Insurers also have to list the benefits that affected consumers would be going without if they choose to keep their current policies (California Healthline, 3/6).

In March, the administration extended the fix for two years, allowing consumers to renew such plans until 2016, with coverage lasting in some cases until September 2017 (California Healthline, 3/7).

More Than Half of States Participate

Thirty-five states implemented the fix in 2014 and about half of all states will allow consumers to keep plans that do not meet the ACA's minimum standards in 2015, according to America's Health Insurance Plans (Politico, 8/13).

California Insurance Commissioner Dave Jones (D) urged Covered California to implement Obama's proposal.

However, Covered California's board unanimously decided not to allow insurers to continue selling policies that do not meet the ACA's minimum coverage requirements.

California law states that after Jan. 1, 2014, insurance policies that are noncompliant under ACA standards cannot be sold or renewed (California Healthline, 3/7).

Fix Affecting Risk Pools, Insurance Rates

According to Politico, insurers have said that the administrative policy led to fewer young, healthy people enrolling in the exchanges in some states than they expected when they initially set premiums. As a result, many insurers are increasing their proposed premiums for the upcoming open enrollment period.

According to Politico, states that have implemented the fix -- including Florida, Iowa and North Carolina -- are facing proposed rate increases of 11% to 18% for next year, above the current average of 7.5% calculated by analysts at the PricewaterhouseCoopers' Health Research Institute.

Cliff Gold -- chief operating officer of Iowa-based not-for-profit insurer CoOportunity Health -- said his company is asking for about twice as big of a premium increase for 2015 than it would have without the administrative fix. He added that in areas where many consumers have kept their old plans, it has "brought bad risk onto the exchange."

Blue Cross and Blue Shield of North Carolina Vice President of Health Policy Barbara Morales Burke said the fix would "definitely" increase the insurer's 2015 rates. She added, "It's a one-time adjustment for what we didn't assume and couldn't have assumed last year before we knew transitional plans were going to be a possibility" (Politico, 8/13).

Joel Ario -- managing director of Manatt Health Solutions and former director of exchanges at HHS -- said, "It really is a state-by-state story. The more transitional policies that are not part of the risk pool yet, the more upward pressure there is on premiums" (Rogers, Washington Times, 8/13).