Blue Shield Gives 80,000 Policyholders A 90-Day Reprieve On Cancellations

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Blue Shield will let some California policyholders extend their coverage for an additional 90 days — until March 31 — under a settlement with the California Department of Insurance announced Tuesday.

The settlement is specific to Blue Shield of California Life & Health Insurance Co. — one of two Blue Shield companies operating in the state. It does not necessarily presage a widespread delay in health policy cancellations.

Blue Shield Life and Health will stop selling new individual health insurance policies in 2014. In mid-September, it notified about 80,000 policyholders that their insurance will be terminated Dec. 31 and offered them a new policy from its sister company, Blue Shield of California.

The California Department of Insurance — which regulates the life and health company — objected, saying its policyholders were entitled to 180 days notice.

In California, if an insurer withdraws an individual health plan from the market, it must give policyholders 90 days notice but if it exits a market, it must give 180 days notice.

Blue Shield Life and Health contends that a 90-day warning was sufficient because it is not exiting California entirely. It will continue selling group health insurance and will let customers renew individual policies that are grandfathered, meaning they had them before March 2010 when the Affordable Care Act was signed.

Nevertheless, Blue Shield said it agreed to the settlement “under threat of legal action.”

The company will send letters to its non-grandfathered customers giving them the opportunity to continue their policies until March, 31, but they must accept the offer by Dec. 6. If they don’t, their policies will terminate Dec. 31, according to Blue Shield spokesman Stephen Shivinsky.

The settlement does not affect customers of Blue Shield of California, which is regulated by a different agency, the California Department of Managed Health Care. It notified 39,000 non-grandfathered policyholders in mid-September that their insurance will terminate in Dec. 31 and offered them replacement policies.

Blue Shield of California will not let these customers continue their policies after Dec. 31 because its contract with Covered California, the state’s health care exchange, does not allow it, Shivinsky said.

Federal law requires all health insurance policies sold or renewed in 2014 to comply with the Affordable Care Act unless they are grandfathered. No existing policies in California comply with the act and the same is likely true nationwide.

Under federal law, companies can keep non-compliant, non-grandfathered policies in force only until their renewal date in 2014.

Covered California, however, required companies selling policies on the exchange to cancel all existing, non-grandfathered policies by Dec. 31, regardless of their renewal date.

Blue Shield of California is participating in Covered California. Blue Shield Life and Health is not.

A Blue Shield customer who opts to continue a non-grandfathered policy past Dec. 31 does not have to keep it until March 31, but must enroll in a new plan by March 15 to avoid a coverage gap, the company said.

Some customers would be better off turning down the extension. Households with income between 138 and 400 percent of the federal poverty level can get a federal tax credit to offset their premiums if they purchase a policy on a health care exchange. They generally would be better off choosing a new plan by Dec. 15 so they can get subsidized coverage starting Jan. 1.

Consumer Watchdog called on other health insurance companies in the state to postpone cancellations, and on Covered California to allow it. “People who don’t get subsidies should be able to make a choice over the natural course of the next year as their policies lapse. They shouldn’t be forced to do it this year,” said Jamie Court, president of the consumer group. “What doesn’t make sense is that people have to make to make a decision with a gun to their head when (exchange) Web sites aren’t working.”

The Blue Shield settlement “has little impact on Covered California,” its executive director Peter Lee said in a statement. “Covered California has always been guided by the vision of starting 2014 with a level playing field and a single risk pool, which allows Californians to get better benefits in a more stable market.”

It’s not clear whether regulators will force other companies to give consumers a cancellation reprieve. “We are reviewing notices sent by other insurers, but this is unique in that Blue Shield is exiting the market, which is why the 180 days is required,” a spokeswoman for California Insurance Commissioner Dave Jones said in an e-mail.


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