Thirty-nine Democrats joined 222 Republicans to pass a House bill Friday that would allow insurers to renew individual policies and sell similar policies to new customers next year even if those policies do not meet the benefit and other requirements of the Patient Protection and Affordable Care Act. That legislation goes further than the president's administrative action, which does not allow insurers to sell noncompliant policies to new customers.
Some said the healthcare problems could jeopardize Obama's legacy and even the future of activist government. But many experts say the president could still come out fine as long as his team gets the federal HealthCare.gov website working by the end of November.
Bowing to growing political pressure, Obama apologized last Thursday for the troubled launch of the federal exchange and for misleading people with his pledge that Americans could keep their plan if they like it. But his new policy left it up to insurers and state regulators to decide whether to renew noncompliant plans. Insurance regulators in several states quickly said they would not allow such plans to be renewed. All this could leave the individual insurance market in chaos.
The president's retreat came one day after HHS announced lackluster enrollment figures for the federal exchange. In the first month, about 106,000 Americans signed up for a health plan through the state- and federally run insurance exchanges, with just 26,794 of those coming through the federal HealthCare.gov website. That's about one-fifth of the 500,000 sign-ups the Obama administration had projected for October.
Both the National Association of Insurance Commissioners and America's Health Insurance Plans issued terse warnings about the implications of allowing existing plans to continue next year. Insurance commissioners in three states— Arkansas, Vermont and Washington—indicated that they would not allow insurers to reinstate canceled plans, while others said they were still deciding what to do.
Obama's new policy “threatens to undermine the new market, and may lead to higher premiums and market disruptions in 2014 and beyond,” said James Donelon, Louisiana's insurance commissioner and president of the NAIC, in a written statement.
That was echoed by AHIP President Karen Ignagni. “Premiums have already been set for next year based on an assumption of when consumers will be transitioning to the new marketplace,” she said in a written statement. “If now fewer younger and healthier people choose to purchase coverage in the exchange, premiums will increase and there will be fewer choices for consumers.”
With just six weeks left before the canceled plans end Dec. 31, there are major logistical problems for insurers in renewing policies they had canceled. An estimated 11 million Americans are covered by individual-market plans, and a significant percentage of them have received notifications that their plan won't be renewed. Insurers generally have to obtain rate approval from state regulators for renewed plans.
Joel Michaels, a partner at McDermott Will & Emery in Washington, said it's a difficult task for insurers to send new notices to policyholders, determine premium rates for existing plans and deal with the state regulatory process—all before Jan. 1. An even bigger problem, he said, is that the president's announcement changes the actuarial assumptions behind the benefits and pricing for the new exchange plans. Insurers set those premiums assuming they would get a balanced pool of healthier and sicker enrollees. But now it's thought that healthier people will stay with their existing plans.
Obama admitted that his administration “fumbled the rollout” of the healthcare law and said he's committed to making changes that are necessary to get it working. He also acknowledged the potential political fallout for Democrats who have championed the law and are catching heat from disgruntled constituents. But later Thursday, he strongly defended his effort to provide health coverage for nearly all Americans.