November 15, 2013 1:02 am

Insurers and state officials join to question Obamacare fix

Insurance companies raised doubts about whether a White House proposal that changed a main part of “Obamacare” could be implemented after expressing deep resistance to the plan.

A proposal unveiled by Barack Obama on Thursday that would allow millions of Americans to keep their insurance plans was designed to get the US president out of a political jam.

But it appeared to create a host of problems, not only for insurers but also state insurance commissioners, who said in a joint statement that the plan threatened to “undermine” the new market and result in higher premiums for consumers.

Like many aspects of the US healthcare system, both the underlying problem and the proposed solution are complicated. Mr Obama has come under fire for failing to live up to a pledge that no American who previously bought insurance in the individual marketplace would lose their coverage as a result of the Affordable Care Act, his 2010 healthcare law that takes effect in 2014.

But millions of people have been receiving letters from their insurers warning them that their plans would be cancelled next year because they did not meet higher regulatory standards under the ACA that requires insurers to provide certain benefits.

Initially, the White House emphasised that people getting such letters would be better off buying new plans under the law, because the new plans would be more comprehensive, less expensive and, in most cases, subsidised.

But after being hit by criticism, including from Democrats, for his failed promise on Capitol Hill, Mr Obama relented. He announced that insurers could continue to offer the old plans to existing customers, as long as they made customers aware of the benefits they were not receiving under the old plans and that alternatives were available. What the White House failed to articulate is the business dilemma now facing ­insurers.

Mr Obama and Democrats in Washington “appear to be throwing this ‘hot potato’ into the hands of the insurance industry who will now be on the hot seat to agree to do the impossible or take the heat for failing to do so”, said Robert Laszewski, a healthcare analyst.

He pointed out that companies had just 32 days to reprogramme their computer systems for policies, rates, and eligibility of plans they thought they had to cancel, send notices to the policyholders, explain differences between their plans and plans under the ACA, and elicit a response from customers about their decision. “All by January 1,” he added.

The top insurance industry lobbyist, America’s Health Insurance Plans, said the White House move could stop younger and healthier people from participating in the online Obamacare exchanges, leading to higher premiums and “fewer choices” for others.

Tim Jost, an analyst who supports reform, said the White House’s proposal would leave insurers who are on the exchanges with a “worse risk pool” than expected.

“The ball has been handed off to them and now the insurers have to decide whether they want to offer this coverage,” said Mr Jost.

A lot of the really sick folks will be coming on to the exchange due to pre-existing conditions – and they have to be accepted. The young will want to keep their [current] coverage, so we’re going to have a sicker and older risk pool.

- Ralph Hudgens, Georgia’s state insurance commissioner

That is because when insurance companies such as WellPoint and Blue Cross Blue Shield decided to participate in the new statewide exchanges, they proposed premiums based on assumptions that other policies in the individual market would no longer be available. Also, that customers who had bought old plans – especially young and healthy people – would now buy new plans on the exchanges, therefore ensuring that the risk pool was diverse.

Some state commissioners, who have oversight of the state plans, said they would not take up the White House proposal.

“We are staying the course . . . I believe this is in the best interest of the health insurance market in Washington,” said Mike Kreidler, the commissioner in Washington state.

Laura Cali, the insurance commissioner in Oregon, also said the move would be too difficult, and too confusing for participants.

But in Georgia, Ralph Hudgens, the state commissioner who is opposed to the law, said he would allow plans that were due to be cancelled to be renewed.

“A lot of the really sick folks will be coming on to the exchange due to pre-existing conditions – and they have to be accepted. The young will want to keep their [current] coverage, so we’re going to have a sicker and older risk pool,” he said.

The commissioner in California, David Jones, had a more rosy take on the situation, saying he did not believe that allowing people to renew existing policies would be “fatal” to the state’s exchange.

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