The different scenarios in Oregon and North Carolina highlight the complexities of responding to the announcement by President Barack Obama this month that health plans in the individual and small-group markets that do not comply with the ACA could be renewed for current subscribers for 2014. Renewing customers would not be eligible for a federal premium subsidy. Obama passed the burden for deciding whether to allow renewals to state regulators and insurers. That has left them scrambling to decide how to proceed, with little time left before those plans expire at the end of the year.
“Reversing these canceled policies is no joke,” said John Gorman, a Washington-based consultant who advises insurers. He noted that insurance commissioners must decide whether to allow renewals. Then insurers have to underwrite and re-price the plans, and reconfigure systems to process the enrollments and claims. He doubted many insurers would choose to do so. “I don't think there will be much uptake, either from plans or subscribers.”
Obama was reacting to a political uproar after hundreds of thousands of people with plans that didn't comply with the requirements of the ACA received cancellations from insurers. Individual-market customers represent a small fraction of the overall U.S. insurance market—roughly 6%. But the cancellations contradicted Obama's promise that people could keep their health plan if they liked it.
Insurers reacted sourly, warning that renewing noncompliant policies could drive up premiums in 2015 and destabilize the risk pool. So far, only a few have said they would renew those plans.
Responding to the anxiety among insurers, the Obama administration late last week pushed back the start of open enrollment on the exchanges for 2015 by one month, to Nov. 15, to give insurers more time to analyze the pool of exchange enrollees and set rates for 2015.
But Mark Pauly, a professor of healthcare management at the University of Pennsylvania, argued that insurers' fears about renewing noncompliant plans are overblown given that the change affects such a small segment of the overall market. If renewing customers pull out of the exchanges, “it's not going to bump up the average risk all that much,” he said. “There's not enormous numbers.”
Meanwhile, regulators in about 15 states still had not decided at deadline. As of Friday, states including California and New York, had decided that they would not allow renewals, while a number of states, including Illinois and Texas, had decided that they would.
California's insurance exchange board made the decision not to allow renewals after reporting a surge in enrollment, to nearly 80,000. It said allowing renewals of noncompliant plans would undermine the exchange market's growing success.