By Julie Appleby
News that health insurers are ending the policies of what could be millions of Americans has rattled consumers and added to the debate over the health care law.
If you or a family member has been notified that your individual policy is being cancelled at year’s end, you may be stunned and upset.
House Republicans sparred with Health and Human Services Secretary Kathleen Sebelius Wednesday over the cancellations, with Sebelius saying the law generally didn’t require insurers to discontinue plans if they were in effect at the time of the law’s enactment in March 2010.
No one knows how many of the estimated 14 million people who buy their own insurance are getting such notices, but the numbers are substantial. Some insurers report discontinuing 20 percent of their individual business, while other insurers have notified up to 80 percent of policyholders that they will have to change plans.
Here is a guide to help you understand the bigger picture, including why your premiums and benefits are likely to change next year and what you should consider as you shop for a new policy.
Q. Why is this happening?
A. The so-called individual market was targeted by the health care law because it didn’t work well for many people who do not get coverage through an employer, particularly those who were older or had health problems. The latter were often rejected for coverage, charged more or had their conditions excluded from coverage. Some policies were so skimpy they provided only the barest of coverage when someone did fall ill.
Starting Jan. 1, insurers can no longer reject people who are sick or charge them more than the healthy under the Affordable Care Act. They must also beef up policies to meet minimum standards and add benefits, such as prescription drug coverage, maternity care and mental health services.
Q. Why am I getting this notice?
A. Most likely your plan didn’t meet all the standards of the federal health law. One type of policy being discontinued by Florida Blue, for example, did not cover hospitalizations or emergency room visits and paid a maximum of $50 toward doctor visits. It’s possible your plan also had deductibles and other potential expenses - such as copayments for doctors and hospital care -- that exceeded the law’s annual out-of-pocket maximum of $6,350 for individuals or $12,700 for families. Insurers may have just decided to end certain types of policies, something they have always had the ability to do. Some policies that fail to meet the law’s standards can still be sold, but only if the insurer decides to continue them and they are “grandfathered,” meaning you purchased one before March 2010 and neither you nor the insurer has made any substantial change since then. Adjusting an annual deductible, which many people do each year to keep down their premiums, is a change that could end grandfathered status.
Q. How are insurers picking policies to discontinue?
A. Some consumers fear they are being targeted because they are unhealthy or otherwise unprofitable for an insurance company. Kansas Insurance Commissioner Sandy Praeger said insurers can only discontinue entire blocks of business and cannot simply pick and choose certain customers to cancel. Those whose policies are canceled can sign up instead for a new plan and can’t be rejected because of their health. Insurers say they are ending policies that don’t meet the law’s standards or were not grandfathered. And some of those are profitable plans: Kaiser Permanente in California, for example, says the biggest block of policyholders losing their current coverage were enrolled in a popular $4,000 deductible plan with no maternity benefits that was doing so well that they had not had to raise rates in several years. They actually had to send rebates to policyholders last year under a provision of the health law that requires insurers to spend at least 80 percent of enrollees’ premiums on medical care or issue rebates. (KHN is not affiliated with Kaiser Permanente).
Q. My insurer says if I renew before the end of the year, I can keep my current plan. What does this mean?
A. In some states, insurers are offering selected policyholders a chance to “early renew,” meaning they can continue their existing plan through next year, even if it doesn’t meet all the law’s standards. If you choose this option, your premium may still go up, but the cause would be medical inflation, rather than the need to add benefits because of the health law. Not all states allow early renewals. Fearing insurers would offer such renewals only to their most profitable plans, a handful of states, including Illinois, Missouri and Rhode Island, barred insurers from doing it.
Q. Why are premiums changing?
A. Under the old rules, insurers could decide whether to accept you - and how much to charge -- based on answers to dozens of medical questions. You no longer have to fill out those forms. Starting Jan. 1, insurers can no longer charge women more than men, reject people who are sick or charge them more and can charge older people only three times more than younger ones. They’re also adding new benefits.
As they drew up the rates for 2014, insurance firms had to make educated guesses about how many customers would stay, how many new ones they would attract - and what the health conditions of those new members might be. Actuaries say the new rules on how much insurers may vary rates level the playing field, making premiums more of an average. Older buyers or those who had above-average health problems - and whose former rates reflected those problems - may find their premiums going down. Younger or healthier people, on the other hand, may find premiums going up, sometimes sharply. Under the new rules, consumers “are not paying based on their own health status, but an average health status,” said Robert Cosway, an actuary with consulting firm Milliman. “The positive side is that people in poor health won’t have to pay as much, but the way you get there is that people in better health have to pay more.”
Q. I don’t qualify for a subsidy, and my premium is going way up for what the insurer tells me is a comparable policy. Why is that?
A. Insurers base premiums on a number of factors, including medical inflation and the cost of implementing insurance rules. A report on the California market done by Cosway at Milliman estimated that medical inflation and changes from the health law could add about 30 percent to the average premium in California. The biggest chunk of the increase was attributed to insurers being required to accept everyone, even those who are ill. That requirement polls well with the public. But it makes insurers nervous because they can no longer reject the costliest patients. While consumers like George Anders of California says he supports the concept, he’s not happy that his current plan is being discontinued. Anders, a contributing writer for Forbes and author of a critique of HMOs called Health Against Wealth, said the premiums for a new policy that covers him, his wife and two children will about double, although his annual deductible may go down. “As a social policy, I’m glad to see everyone get coverage, but if you’re going to add cost to the system, I’d like to see it spread equitably,” perhaps through an across-the-board tax, rather than just hitting policyholders, he said.
Q. I’m healthy. Why do I have to pay for people who are sick?
A. Except for a fortunate few, everyone is likely to develop some kind of health problem or face an accident sometime in their lives. Policy experts and regulators say insurance works best when it spreads risk across a large group of people. Your house may not burn down this year, but you pay for insurance coverage just in case.
Q. I’m a single man, why do I have a plan with maternity coverage?
A. Again, it’s about spreading the risk. Men may not need maternity care, but women don’t need treatment for prostate cancer and those costs are baked into the rates, too. Older men, and women past child-bearing age, are more likely to need treatment for heart disease, artificial hips or other illnesses that younger men and women are less likely to need. “The whole concept of insurance is you can’t just pick and choose the benefits you want,” said Praeger. If people - especially older ones - get premiums based solely on what they might need, she said, “it could cost a whole lot more.”
Q. What if it turns out they’ve charged too much for the new coverage?
A. Under the health law, insurers who fail to spend at least 80 percent of their premium revenue on medical care have to issue rebates to consumers. Those rebates for 2014 policies won’t be seen until 2015, however.
Q. I’ve gotten this notice, what should I do now?
A. Experts say people should scrutinize the terms of their soon-to-be-discontinued policy and compare them with what new policies offer. The monthly premium is just one factor in cost. Also note the deductible. Is it per person? What is the maximum deductible if two or more family members fall ill in the same year? Finally, note the annual out-of-pocket cap, which is the maximum you pay in deductibles and co-payments for medical care during the year.
“People need to be aware of their range of options,” said Cori Uccello, senior health fellow at the American Academy of Actuaries. Direct comparisons may be difficult, she warned, as the new policies will often cover a wider range of benefits, but you should be able to compare deductibles and copayments for various services, including drugs.
Some insurers are recommending new plans that are most similar to the one being discontinued, and could automatically enroll you in such a plan if you take no action. Those are not your only options. You should double-check and compare a range of plans, experts say. An independent broker can show you plans from various carriers. You can also check your state’s online marketplace or log onto or call healthcare.gov, the website serving 36 states that opted not to create their own marketplaces. While consumers are having trouble creating accounts through healthcare.gov, the website now allows shoppers to browse health plans without creating an account. When browsing, however, be aware that the premiums are not actual quotes because they do not reflect your exact age. Nor do they show subsidies, although several online calculators-including some on state marketplace websites and another by the nonpartisan Kaiser Family Foundation can give you a good idea of how much you might receive toward coverage, based on your income. (Kaiser Health News is an editorially independent program of the foundation.)
Kaiser Health News is an editorially independent program of the Henry J. Kaiser Family Foundation, a nonprofit, nonpartisan health policy research and communications organization not affiliated with Kaiser Permanente.