Decision To Deny Policy Extensions Surprisingly Easy for Exchange Board

The Covered California board voted unanimously yesterday to maintain the year-end deadline for elimination of a specific type of individual health insurance in California, rejecting an extension endorsed last week by President Obama.

Surprisingly, the board met little resistance to its decision at yesterday’s meeting.

“I came to this [meeting] today thinking, if we could take more time and extend that period for three months … that would help,” said Diana Dooley, California HHS secretary and chair of the Covered California health benefit exchange board.

“There are some people who are adversely affected. And we have an obligation to smooth the edges and extend the runway for them,” Dooley said. “I am persuaded by the staff analysis. But … this is hard on some people who have done the right thing, bought their own insurance, and their short-term dislocation, that is very troubling.”

An estimated 590,000 Californians could feel a financial sting from the decision, according to Covered California data. About 900,000 Californians currently are enrolled in “non-grandfathered” individual insurance plans, and about 310,000 of those are eligible for subsidies to enroll in the exchange. The price of insurance could rise for those remaining 590,000 people, in part because the coverage is better.

People who bought policies in 2010 and kept them have “grandfathered” policies, and won’t be affected, but many people switched plans during that time, and those plans are supposed to be ACA-compliant. Last week, President Obama said states could extend those non-grandfathered policies for a year.

But that move carries its own pitfalls.

In California, where the health benefit exchange is in high gear, exchange officials worried that having that many exceptions to the ACA rules could hamper the way the exchange works, and could violate the contracts the exchange signed with insurers. And it directly goes against a decision the board made about a year ago. 

“In California we decided [in December 2012] that allowing carriers to do early renewals wasn’t going to work,” said Leesa Tori, senior advisor of plan management at Covered California. “We wanted to make sure consumers who are eligible for subsidies have an incentive to shop. We wanted to align everybody and put them on an even playing field.”

California Department of Insurance officials said the vote by the exchange board was “a disservice to policyholders.”

“Covered California rejected what President Obama and I asked for,” said Insurance Commissioner Dave Jones, “that individual policyholders be allowed to keep their existing health insurance through all of 2014.”

The exchange staff gave three options to the board:

  • Deny the extension of non-grandfathered, non-compliant policies;
  • Extend those policies through Mar. 31, to give those policyholders time to sign up for new policies; or
  • Extend those policies a full year, through Dec. 31, 2014.

“Option 1 is pretty much off the table because there are 200,000 people who had notices who have already had their extensions happen,” said CDI deputy commissioner Janice Rocco at yesterday’s board meeting, Rocco was referring to two recent moves by CDI, forcing insurers to follow the 90-day cancellation protocol, which bumped up the deadline for policy cancellation into the first three months of 2014.

But apparently Option 1 wasn’t off the table at all.

“Insurance is confusing. We need to step in and help people understand it,” Covered California executive director Peter Lee said. It’s true, he said, that “two plans are currently out of compliance with the ACA” regulations because of the extension of non-compliant policies being issued into 2014. “But it’s a regulatory act that requires them to be out of term,” Lee said.

Lee didn’t want to derail the enrollment train at the exchange by confusing Californians and possibly harming the entire effort by changing the risk pool for insurers within the exchange.

“We assumed everyone is going to be in the risk pool,” Lee said. “It is possible that health plans would have losses on that, by changing actuarial risk.”

Tori pointed out that the central problem — an increase in rates on non-grandfathered plans — would be exactly the same problem later, if the extension was approved.

“If we did the 12 months’ [extension], we’d have the same problem in a year,” she said.

The decision met little resistance from stakeholders. Representatives from consumer groups and health insurers got up at the meeting to support the decision.

“It feels a little like we’re talking about the pre-nup after the wedding,” said Micah Weinberg, a senior policy advisor for the Bay Area Council. “It’s very late to be talking about this now. … It’s just way too late in the day to make this kind of change.”

“As we entered into this journey, we know this transition is difficult,” said board member Susan Kennedy. “Delaying the transition doesn’t solve a single problem, it just kicks it down the road. It actually will make a bad situation worse. I don’t think we have a choice, but to choose Option 1.”

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