ObamaCare Fix Could Bring More Trouble for Insurers

By FeaturesFOXBusiness

The president’s fix to keep his promise to Americans that if they liked their current coverage they could keep it under the Affordable Care Act has relieved many—except those in the insurance industry.

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President Obama's controversial fix, that he offered in November amidst the botched rollout of HealthCare.gov, allows people to keep their previously-cancelled plans through 2014 at the discretion of insurers and state regulators. The move set the insurance industry scrambling to figure out how to re-instate the policies. Industry insiders confirmed to FOXBusiness.com that the administration was planning to extend the fix, although it is not clear when the move will be announced or the length of the extension. The Hill first reported the extension would be at least another year, potentially through the end of Obama’s second term.

The Centers for Medicare and Medicaid Services/Department of Health and Human Services were not available to comment on the reported extension.

“The Administration has committed to doing all we can to smooth the transition for hard-working Americans. We’ve taken steps already and are continuing to look at options. HHS said in November that we would consider extending the option for Americans to renew old plans beyond this year and we will provide final guidance on this issue soon," CMS spokesperson Joanne Peters told FOXBusiness.com in an e-mail message.

Some argue the extension is political, and would help Democrats in the upcoming mid-term elections and the 2016 presidential races. So far, more than six million Americans have had their health insurance plans cancelled because they didn’t meet coverage requirements mandated under the Affordable Care Act.

Under the ACA, all insurance plans have to offer 10 essential health benefits, including ambulatory services, maternity benefits and prescription drug coverage. Every person in the country has to have insurance by the end of open enrollment on April 1, or they will face a fine of $95 or 1% of their annual income.

When Obama first announced the fix, CMS acknowledged the potential for extending the policy further. “We will consider the impact of this transitional policy in assessing whether to extend it beyond the specified timeframe,” Gary Cohen, director for Consumer Information and Insurance Oversight at CMS wrote in a letter to insurers last fall.

While the not-yet-confirmed move may be a hassle to insurers, it won’t be detrimental to large insurance companies, says Vishnu Lekraj, senior health insurance analyst at Morningstar. That’s because individual plans only make up about 3%-5% of their business, he says the smaller companies may be adversely impacted.

“They aren’t forced to underwrite these old plans, so they can still cancel them or not renew.”

Tom Harte, president of the National Association of Health Underwriters, says the move would be unfair to the insurance industry, which has already spent millions of dollars to comply and meet the deadlines it was assigned under the president’s legislation.

“This is good practice for politics, but bad in the real world,” Harte says. “It is cost prohibitive to have to administer these plans, and is contradictory with the original intent of the law.”

Harte adds that consumers may see higher costs if insurance companies are forced to continue to offer plans that were previously cancelled.

“If you…allow people to grandfather their plans for another year or two, the people who jump on these exchanges will be older and unhealthy,” Harte says. “Those who stay on their plans will be younger and healthier, so you throw the bad population onto the exchange and drive up rates for everyone.”

Lekraj agrees, and says he understand the political push to extend the fix.

“In the grand scheme of things, I see from a political angle that this is a mid-term election year,” he says. “What will be a huge driver is the ultimate makeup of these exchanges.”

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