The clock is ticking on 1 million Californians forced to buy new health insurance because their plans don't comply with the federal health care law, but on Tuesday one of the state's biggest health insurers was forced to give its customers a three-month reprieve.
Blue Shield of California must delay canceling health insurance policies that cover 119,000 people, many of whom are scrambling to buy new policies on the state's new health insurance exchange — and consumer advocates are urging other insurance companies in California and the rest of the nation to follow suit.
"It's not fair that just one group of policyholders has extra time," said Jamie Court, president of Consumer Watchdog.
The California Department of Insurance threatened to sue Blue Shield if it didn't hit the brakes on canceling thousands of policies, claiming the insurer was using the new health law to force its customers into more expensive coverage that includes too few doctors and hospitals.
But Tuesday's development took on greater significance with a Dec. 15 deadline looming for the million Californians who need to sign up for new health coverage after being notified their current health plans don't include all of the coverage required under the Affordable Care Act, commonly known as Obamacare.
About 14 million Americans with individual health insurance policies are being kicked off their plans by year's end because those policies do not comply with the new law's requirements that include benefits such as maternity care and mental health coverage.
But California Insurance Commissioner Dave Jones said neither federal nor state law requires insurers to cancel these policies by Dec. 31. In California, he said, "this is something that the health insurance companies and Covered California have decided to do," referring to the state's insurance exchange.
The cancellation of the policies has created a political firestorm across the country, with critics of President Barack Obama calling it a betrayal of his promise that all Americans who already have insurance could "keep it." Supporters of the law, however, say that the policies are mostly "junk insurance" that consumers should be happy to get rid of so they can obtain better plans on the new online marketplaces.
In California, Jones said, individual policies are being canceled by insurance companies, which are then "mapping" the policyholders to comparable, but often more expensive, plans that meet the requirements of the health care law — the bulk of which is taking effect on Jan. 1.
Of the million Californians losing their current policies, about 300,000 are eligible for federal subsidies on the state's new online exchange.
So far, exchange officials and the health insurance industry are resisting consumer activists' call for extending current policies — like Blue Shield will do — until March 31.
On Tuesday, officials with Covered California and the California Association of Health Plans issued statements that either downplayed Jones' decision or expressed skepticism that the delay would do any good. And San Francisco-based Blue Shield noted "significant risks" to policyholders who choose to extend their current coverage through March 31, including the possibility of having to pay a deductible twice in one calendar year.
The association warned that a three-month delay "does nothing to change" the reality that these individuals will have to sign up for a new plan. Moreover, it said that the delay could "pose potential negative cost impacts for customers."
But Court and others say policyholders need more time to study their options under the new law, especially because some health care exchange websites are unreliable and, in the case of the federal website used by 36 states, are not expected to be up to speed until the end of this month.
The cancellations, Court said, "are being implemented to drive consumers to higher-priced policies."
Blue Shield spokesman Steve Shivinsky confirmed that two-thirds of the company's individual policyholders will see a rate increase, but he said that increase would vary depending on the plan they select.
Consumers have less than six weeks to enroll in an insurance plan that would offer them coverage beginning Jan. 1. If they're still unable to use the problematic websites, observers worry, a rush to sign up by Dec. 15 could leave many uninsured into early next year.
A West Coast spokesman for the U.S. Centers for Medicare & Medicaid Services declined to comment on any possibility that the federal government would agree to delay the cancellation of these policies.
Jones on Tuesday said that after the state Department of Insurance found rates for many of Blue Shield's new health plans to be excessive and its provider network inadequate, it notified the company about its concerns. By mid-October, he said, Blue Shield informed Jones' office that it was choosing to be regulated by the state's Department of Managed Health Care rather than Jones' Department of Insurance — something it has a right to do under California law.
"They decided to pick up their marbles and move their marble game," Jones said.
But he explained that the decision meant that Blue Shield had to give its customers with individual policies 180 days notice that it was doing so, not the 90 days Blue Shield believed was the case. Jones said he threatened to sue Blue Shield if it did not follow the law, and the company complied.
Contact Tracy Seipel at 408-275-0140. Follow her at Twitter.com/taseipel.
