Amid objections over the vast number of cancellation notices sent out by health insurance companies, and in an attempt to make good on the promise that, “If you like your healthcare plan, you can keep your healthcare plan,” President Obama announced on Nov. 14 that insurers can allow customers to keep their individual insurance plans through 2014, regardless of whether or not the plans meet the Affordable Care Act minimum requirements. At a news conference at the White House, the president explained, “The bottom line is that insurers can extend current plans that would otherwise be canceled into 2014, and Americans whose plans have been canceled can choose to re-enroll in the same kind of plan.”
Why Have Plans Been Canceled?
Health insurers in recent months have sent hundreds of thousands of notices to subscribers explaining that their plans will no longer be offered due to healthcare reform changes. Many such notices have indicated that the insurance companies will automatically shift subscribers to the plans that most closely resemble current plans, but that are in compliance with the new healthcare laws. The notices come as a surprise to some subscribers who thought they would be able to keep their plans if they liked them.
The “if you like your plan, you can keep it” pledge was perhaps intended to apply to plans that existed on (or before) March 23, 2010. These plans are known as “grandfathered” and, as long as no significant changes are made to the plan, insurance companies can continue offering them to subscribers, even if they don’t comply with current requirements. Because changes to health plans are common, however, many grandfathered plans have already been discontinued. The Survey of Employer-Sponsored Health Benefits by the Kaiser Family Foundation, for example, shows a substantial decrease in the percentage of employees enrolled in plans that are grandfathered under the Affordable Care Act. In 2011, 56% of workers were enrolled in grandfathered plans; this year, the number has fallen to 36%.
Any non-grandfathered plan was supposed to meet the new Affordable Care Act minimum requirements by 2014; thus, the spate of cancelation notices. President Obama’s announcement, however – a bit of a hail Mary during the glitch-riddled healthcare law roll-out – gives state insurance commissioners the option to sell out-of-compliance plans for one more year; and subscribers, therefore, may be given an extra year to find healthcare that is ACA-compliant.
First of all, it’s important to recognize that the president has given individual state insurance commissioners the option to continue selling non-compliant plans for one year – this doesn’t mean they have to. It should also be clarified that this extension applies to existing subscriber plans only – you will not be able to go and purchase a non-compliant plan as a new subscriber. In the coming weeks, states and individual insurance companies must decide if they will allow subscribers to keep their non-Obamacare-compliant plans. At this point, because insurers have already set in motion the cancelation process, the decision to offer non-compliant plans poses both technological and economic challenges (as well as a paperwork nightmare) to insurers who would have to retool their systems in short order. Since the president’s announcement was made, few state insurance commissioners have made any decisions, keeping subscribers wondering what will happen to their plans.
With this short-term fix, if you like your plan, you can keep it – as long as your state insurance commissioner and insurance company agree. Some states have already decided not to jump on board with the fix. Mississippi, for example, sees no reason to since they have had very few policy cancelations. As state-commissioner Mike Chaney explained, “I do not plan to adjust any state policies/regulations to comply with the White House’s request. We have very few sub-standard plans in Mississippi. The number of policies canceled in our state is less than 500.”
Now We Play The Waiting Game
Insurance companies are expected to send letters in the coming weeks to subscribers who have been affected by cancelations, explaining what will happen next. In the meantime, you may be able to find updates on your insurer’s website or social media profiles. Blue Cross Blue Shield of North Carolina, for example, has a notice prominently displayed on its homepage that reads (in part): “[We are] currently exploring options that may provide relief to customers who were faced with losing a health plan they liked. We expect to file plans with the North Carolina Department of Insurance in the next few days. We expect to have more details to share next week.”
Chances are, if you are allowed to keep your existing, non-compliant plan, it will be less expensive than the plan your insurance company would automatically move you to. It is important to consider, however, that there’s a reason it’s less expensive: it probably doesn’t provide coverage for the 10 Essential Health Benefits as defined by Obamacare (healthcare expenses such as emergency service, maternity and newborn care, and mental health services and addiction treatment). An existing plan may be cheaper upfront, but can cost you more in the long run if you have a medical expense that’s not covered.
If your insurance company allows you extend your current plan, it is required to mention that you can purchase coverage through the Health Insurance Marketplace, where you might qualify for tax credits and subsidies that can significantly lower your health insurance costs. Your insurance company must also explain what protections you are giving up by keeping a non-compliant plan (for example, many preventive services – such as blood pressure screening and adult immunizations – are covered at no cost to you under the new health law).
Although the HealthCare.gov website has been plagued by problems since its Oct. 1 launch, the Obama administration has vowed to fix the site by the end of the month, making it easier for you to compare and shop for health coverage, as well as find out if you qualify for tax credits and subsidies. If you are not able to apply online through the HealthCare.gov website, there are three alternatives to choose from: by phone (1-800-318-2596, 24/7; call 1-855-889-4325 for TTY), or in person through a navigator, application assister, certified application counselor or a government agency (such as State Medicaid and Children’s Health Insurance Program offices). Even if you have trouble using the HealthCare.gov site for the actual application process, the website’s other features have been, and remain, completely functional.
The ability for the tax credits and subsidies to reduce your overall healthcare costs cannot be emphasized enough, but you must apply for a Marketplace plan to determine your eligibility and to receive these benefits. The Cost-Sharing Reduction is a discount available to individuals and families whose incomes fall between 100 and 250% of the Federal Poverty Level (FPL). For example, a family of four may qualify if their modified adjust gross income is between $23,550 and $58,875. This subsidy can lower your costs for out-of-pocket healthcare costs for:
- Deductibles – the amount you owe for covered services before insurance kicks in;
- Copayments – a fixed amount you pay for a covered healthcare service; and
- Coinsurance – your share of the costs of a covered healthcare service.
Advance Premium Tax Credits are available to individuals and families whose incomes are between 100% and 400% of the FPL – or between $23,550 and $94,200 for a family of four. These tax credits are sent directly from the government to your health insurer to lower your monthly premium – up front. As advanceable and refundable tax credits, you will reconcile the credit on your annual tax return: if your advance payments are less than the Premium Tax Credit you compute on your return, the difference will increase your refund (or lower the amount of tax you owe). Conversely, if your advance payments are greater than your computed credit, the difference will decrease your refund or increase the amount of tax you owe (note: the amount you might owe is capped if your income is less than 400% of the FPL).
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The Bottom Line
Much of the healthcare reform has been a waiting game – wait for the HealthCare.gov website to be fixed, and now wait for the state commissioners and health insurers to make decisions in light of the president’s recent announcement – but that’s no excuse to avoid making proactive decisions about your own health insurance situation. Whether you have an existing plan or are new to the health insurance market, it’s a good idea to start learning about your options before the March 31, 2014 deadline to avoid the tax penalty associated with not having health coverage.