Brian Hamm, president of the National Association of Insurance Commissioners, expressed similar skepticism. “This decision allows different rules for different policies which threaten to undermine the new marketplace,” said Hamm, who is North Dakota's insurance commissioner. “Creating two tiers of plans—the compliant and noncompliant—could result in higher premiums overall and market disruptions in 2015 and beyond.”
It's not possible to know at this point how many plans would be affected by the change. But it seems likely that it would be a relatively small segment of the individual insurance marketplace. That's in part because only 26 states opted to allow renewals of noncompliant plans in 2014, according to a survey conducted by the National Association of Insurance Commissioners. That number is likely to drop in future years.
In addition, some insurers in states that did allow renewals of noncompliant plans opted not to take advantage of that option. In Oregon, for instance, Moda Health Plans and PacificSource Health Plans—which represent about 40% of the individual market in that state—opted to allow only renewals through March 2014.
The two-year extension is also likely to prove less onerous for insurers because they will have time to incorporate the change into their premium prices for 2015 products offered through the exchanges. Health plans don't need to submit those plans to the federal government until June.
“At least you can then build that into your pricing for the next couple of years,” said Hans Leida, a principal and consulting actuary with Milliman, a provider of actuarial and related services. “It's a bigger deal for 2014 because the insurers did not know that was a possibility when they set the rates.”
The two-year extension for noncompliant plans wasn't the only change announced by the Obama administration Wednesday. Among others:
- The open enrollment period for 2015 will run from Nov. 15 to Feb. 15, one month longer than previously anticipated. However, there will be no extension to the current open enrollment period, which closes March 31.
- The threshold for the federal government's reinsurance program will be reduced from $60,000 to $45,000 per beneficiary. That program is designed to protect insurers selling products through the exchanges from extremely sick, expensive customers. For 2015, that level will rise to $70,000.
- The risk corridor program will be adjusted on a state-by-state basis. That's designed in part to mitigate losses in states that allow renewals of noncomplaint plans. The risk corridor program provides subsidies to insurers that lose significant money on exchange customers and collects premiums from companies that make substantial profits. The program is expected to be budget neutral.
- States that want to run their own exchanges for 2015 will have until June 15 to get their plans approved by the CMS. Previously, the deadline was Jan. 1. Currently, 14 states and the District of Columbia are running their own online marketplaces.
Some unions, universities and other groups that self-insure will be exempt from paying a fee—$63 a person this year—to bankroll the reinsurance fund. Normally staunch Democratic allies, unions have been harsh critics of some components of the ACA.