For the last week or so, there’s been lots of news coverage of people enrolled in the individual insurance market getting discontinuation notices from their health insurance companies. Up until recently, the news coverage has told only part of the story. More and more, we are hearing that after the initial frustration of getting a cancellation notice, some people are finding that they qualify for a better plan at a lower cost through the Marketplace.
Here’s a summary of what is actually happening and why.
What is going on?
Most people get insurance through a job. But about 5 percent of Americans purchase insurance directly from an insurance company, in what is known as the “individual market.” Coverage in the individual market is generally the skimpiest coverage available, often with high out-of-pocket costs, no coverage of maternity care, and limited coverage of mental health, substance abuse, and prescription drugs. The Affordable Care Act sets new minimum standards for the benefits in health insurance sold to individuals and small employers (the two markets where access to adequate coverage was lacking). For example, plans must cover ER visits, hospitalization, prescription drugs, maternity and newborn care, and mental health care.
Grandfathered plans – those in existence when the ACA was enacted in March 2010 that haven’t changed substantially – do not have to comply with new standards. But policies established since then must meet new standards. In many cases, insurance companies have chosen to discontinue their non-grandfathered, individual market policies and offer enrollees new policies for 2014.
For more on what is going on, see the linked posts by the Georgetown Center on Health Insurance Reforms and the New York Times.
Some context
Routine plan changes and cancellations have always been part of the individual market. For example, in 2009 (pre-ACA), Unicare withdrew from the Texas market and discontinued policies for 180,000 people. Unlike policy cancellations of the past, anyone losing an individual market policy right now has access to coverage in the Marketplace that they cannot be turned down for due to pre-existing conditions and subsidies are available to help low- and middle-income families afford coverage.
Keep in mind that the plans being cancelled are ones sold after the ACA was enacted. Plan cancellation notices are coming from insurance companies that marketed and sold products since 2010 that they knew didn’t meet the ACA standards and would eventually have to be modified to come into compliance.
It is certainly inconvenient to have to shop for a new health plan. And it is frustrating to do that when the Marketplace website isn’t fully functional. But consider the frustrations (or worse) inherent in possible tradeoffs, such as fighting with your insurance company to get them to cover basic care or finding out only after the diagnosis of a serious illness that you have a substandard policy that leaves you with piles of medical bills, or worse, threatens you with bankruptcy.
It is true that some people will pay more for their new plan (but others won’t; keep reading). But generally speaking, these people will be getting something for their money – coverage for benefits that weren’t available before, protection against getting dropped if they get sick, and more protection from medical bankruptcy.
Now we know the rest of the story
Some intrepid journalists have dug a bit deeper to figure out the real coverage options for people who’ve understandably been upset by cancellation notices, and they are finding that initial claims are only part of the story. For example, Dianne Barrett, who went from “Obamacare victim to Obamacare beneficiary” in the space of a week as journalists discovered that the $54/month plan she was losing didn’t cover hospitalization at all, leaving her at risk of bankruptcy in the case of serious illness or injury. What’s more, she is eligible for subsides that would significantly reduce her premiums to a fraction of the $591/month alternate policy quoted in the cancellation notice from her insurance company.
Also, Deborah Cavallaro, who pays $293 a month for catastrophic coverage and thought her only alternative was a replacement plan that costs $478/month. It turns out that in the Marketplace, which she had not explored, she has several options that would help her come out ahead compared to the coverage and premiums she has today.
Who is watching out for consumers?
One thing that seems to be an issue in some of the “debunked” stories is the misleading notices enrollees are getting from insurers that list a price for a default alternate policy and either downplay or completely fail to mention that enrollees can shop on the Marketplace instead and may qualify for subsidies to make coverage more affordable. At the Center, we’ve seen discontinuation notices that went out to Texas enrollees that do not mention the Marketplace at all, and at least in one case, push the enrollee to renew coverage at a higher price than they’d find in the Marketplace.
Departments of Insurance in Texas and other states should ensure that any discontinuation notices sent to enrollees are clear, not misleading, and help consumers understand their range of options including potential subsidies in the Marketplace. Some states (not Texas) have required insurers to share their cancellation letter with the Department of Insurance to better protect consumers. If Texas consumers believe they have received a misleading or inaccurate letter, they should file a complaint with the Texas Department of Insurance online or by calling 1-800-252-3439.
