Thousands of consumers who were granted a reprieve to keep insurance plans that do not meet the federal health law’s standards are now learning those plans will be discontinued at year’s end, and they will have to choose a new, possibly more costly policy.
Cancellations are in the mail to customers in markets where insurers say the policies no longer make business sense. In some states, such as Maryland and Virginia, rules call for the plans’ discontinuation, but in many, federal rules allow the policies to continue through 2017.
Insurers sending the notices to some customers include Waukesha, Wisc.-based Anthem, one of the largest insurers in the country; Baltimore-based CareFirst; Health Care Services Corp. in Chicago; Kaiser Permanente in Oakland, Calif.; Humana in Louisville; and Golden Rule, an Indianapolis subsidiary of UnitedHealth Group.
One reason behind the switch is that insurers determined they can make more money selling plans that comply with the Affordable Care Act, often at higher premiums that may be subsidized by the government.
“They’re getting a lot more revenue, often for the same person,” said consultant Robert Laszewski, a former insurance executive.
Last year, similar cancellation letters sent to more than 2 million customers created a political firestorm for President Obama, who had promised that “if you like the plan you have, you can keep it.”
In response, the administration encouraged states to allow insurers to extend existing plans, even if they did not meet the health law’s standards. Both states and insurers had to agree to the deadline extension, and not all did.
It is unclear exactly how many consumers might be affected by the latest round of cancellations. The move by insurers comes in the weeks leading up to Election Day, possibly playing into the hands of the law’s critics.
Still, experts anticipate less of a backlash this time, noting that the furor last year came amid the disastrous rollout of the federal health-insurance Web site, while this year’s enrollment is expected to be smoother. In addition, fewer people will be affected.
Policyholders will have the choice of switching to different coverage from the same insurer or buying from another one during open enrollment, which begins Nov. 15. “Consumers whose private insurers choose to discontinue their plans may have access to better options through the health-insurance marketplace . . . [including] the opportunity to qualify for financial assistance to help them afford premiums and improved consumer protections,” said Ben Wakana, a spokesman for the Department of Health and Human Services.
More than two dozen states allowed the plans to be renewed, although in some cases for only a year. In California, regulators required individual plans that fell short of the health law to be discontinued by the end of 2013 but allowed those offered by small businesses to continue through 2015.
While there is no national tally of how many people might be affected, brokers and insurers report that many individuals and small businesses renewed the old policies, if they had the choice, because they often cost less than new coverage.
Reasons such plans fall short of the health law vary. Some plans fail to include benefits such as maternity or prescription coverage, or they set consumer costs that could exceed the law’s annual limit of $6,350 per individual or $12,700 for a family. The premiums in many plans are based on the policyholder’s health or excluded coverage for preexisting medical conditions, both of which are no longer allowed.
Not all insurers decided to renew the policies, even in states where they were allowed to do so. Those that did, however, are now reevaluating for 2015.
“It’s in the best interest of our customers and for the long-term viability of the marketplace,” said Greg Thompson, spokesman for Health Care Services Corp. (HCSC), which is discontinuing such plans in New Mexico, Texas and Oklahoma.
Other concerns for insurers are that some of the old policies pay out scant medical benefits because they carry large deductibles, their policyholders are relatively healthy or they have limited benefits. As a result, experts say, they put insurers at risk of violating the law’s requirement that they spend at least 80 percent of premiums on health care or pay consumers rebates.
Though HCSC declined to say how many cancellations it is making for next year, some companies disclosed numbers. Kaiser Permanente is sending letters to about 3,500 customers in the Mid-Atlantic region, reflecting decisions by Maryland and Virginia regulators to permit the plans only through this year, said spokesman Chris Stenrud. The District of Columbia never allowed the extensions.
Hawaii allowed Kaiser Permanente to extend plans through 2017, Stenrud said, while Georgia is permitting consumers to renew their plans through next year. In Oregon, where Kaiser has about 1,500 such policies, state lawmakers allowed plans to be extended through 2015.
Anthem is discontinuing noncompliant individual plans in Indiana, Virginia, Connecticut and Nevada and dropping small-business plans that do not meet the law’s standards in Nevada, New York, Connecticut and Virginia. CareFirst is sending notices to those who hold such policies in Virginia and Maryland.
“The decisions reflect the unique market conditions in each state,” said Anthem spokesman Tony Felts, who declined to say how many customers will be affected.
UnitedHealth Group, which sells individual insurance through its Golden Rule subsidiary, is sending letters to about 1,100 customers in Kentucky, while Humana is discontinuing about 6,500 policies there, according to Kentucky’s insurance department.
In Alaska, Moda Health has told regulators it plans to discontinue its noncompliant plans, affecting about 800 customers, while Premera Blue Cross will continue the old policies, according to the Alaska Dispatch News.
Kaiser Health News is an editorially independent program of the Henry J. Kaiser Family Foundation, a nonprofit, nonpartisan health policy research and communication organization not affiliated with Kaiser Permanente.