Health insurance companies are sending notices of cancellation to hundreds of thousands of people who buy their own coverage, frustrating some consumers who want to keep what they have and forcing others to buy more expensive policies.
Insurers say the cancellations are necessary because the policies fall short of what the Affordable Care Act requires starting January 1. Most are ending policies sold after the law passed in March 2010. At least a few are canceling plans sold to people with pre-existing medical conditions.
By all accounts, new policies to replace the canceled ones offer consumers better coverage, in some cases for comparable cost, especially after the inclusion of federal subsidies for those who qualify. They cover 10 “essential” benefits the law now requires, including prescription drugs, mental health treatment and maternity care, and they generally have lower thresholds for what consumers will have to spend before the plan picks up the full cost of treatment.
But the cancellation notices, which began arriving in August, have shocked many consumers in light of President Barack Obama’s promise that people could keep their plans if they liked them.
“I don’t feel like I need to change, but I have to,” said Jeff Learned, a television editor in Los Angeles who must find a new plan for his teenage daughter, who has a health condition that has required multiple surgeries.
An estimated 14 million people purchase their own coverage because they don’t get it through their jobs. The impact of the cancellations has been felt across the country.
Florida Blue is terminating about 300,000 policies, about 80% of its individual business in the state. Kaiser Permanente in California has sent notices to 160,000 people – about half of its individual business in the state. Insurer Highmark in Pittsburgh has canceled about 20% of its individual market policies, while Independence Blue Cross, the major insurer in Philadelphia, is canceling about 45%.
Both Independence and Highmark are canceling so-called “guaranteed issue” policies, which were sold to customers who had pre-existing medical conditions when they signed up. Policyholders with regular policies because they did not have health problems will be given an option to extend their coverage through next year.
Consumer advocates say such cancellations raise concerns that companies may be targeting their most costly enrollees.
They may be “doing this as an opportunity to push their populations into the exchange and purge their systems” of policyholders they no longer want, said Jerry Flanagan, an attorney with the advocacy group Consumer Watchdog in California.
Insurers deny that, saying they are encouraging existing customers to re-enroll in their new plans.
“We continue to cover people with all types of health conditions,” said Highmark spokeswoman Kristin Ash.
She said some policyholders who may have faced limited coverage for their medical conditions will get new plans with “richer benefits,” and the policies, “in most cases, will be at a lower rate.”
Paula Sunshine, vice president of marketing with Independence Blue Cross, said the insurer hopes the canceled policyholders will “choose Blue when they decide on a new plan.” Some receiving cancellations say it looks like their costs will go up, despite studies projecting that about half of all enrollees will get income-based subsidies.
Kris Malean, 56, lives outside Seattle and has a health insurance policy that costs $390 a month with a $2,500 deductible and a $10,000 annual limit on her share of costs for doctor visits, drug costs or hospital care. As a replacement, Regence BlueShield is offering her a plan for $79 a month more with a $5,000 deductible but that limits her potential out-of-pocket costs to $6,250 a year, including the deductible.
“My impression was . . . there would be a lot more choice, driving some of the rates down,” said Malean, who does not believe she is eligible for a subsidy.
Regence spokeswoman Rachelle Cunningham said the new plans offer consumers broader benefits, which “in many cases translate into higher costs.”
“The arithmetic is inescapable,” said Patrick Johnston, CEO of the California Association of Health Plans. Costs must be spread, so while some consumers will see their premiums drop, others will pay more – “no matter what people in Washington say.”
Health insurance experts say new prices will vary, and much depends on where a person lives, their age and the type of policy they decide to buy. Some, including young people and those with skimpy or high deductible plans, may see an increase. Others, including those with health problems or who buy coverage with higher deductibles than they have now, may see lower premiums.
Blue Shield of California sent roughly 119,000 cancellation notices out in mid-September, about 60% of its individual business. About two-thirds of those policyholders will see rate increases in their new policies, said spokesman Steve Shivinsky.
Like other insurers, Blue Shield let customers know they have to make a decision by December 31 or they will automatically be enrolled in a recommended plan.
“There is going to be a certain amount of churn in the marketplace as people have to make their decisions,” Shivinsky said.