Featured Health Business Daily Story, Dec. 5, 2013

Insurers Wade Through Their Options as States, Exchanges Ponder Enrollment Fixes

Reprinted from HEALTH PLAN WEEK, the most reliable source of objective business, financial and regulatory news of the health insurance industry.

By ,
November 25, 2013Volume 23Issue 42

State insurance regulators are continuing to issue decisions on whether to follow President Obama’s lead and allow previously cancelled health plans to see new life even though coverage does not meet Affordable Care Act (ACA) standards (HPW 11/18/13, p. 1), putting health insurers in the middle of a shifting market landscape, industry consultants say. The next steps for carriers will be to determine how regulatory decisions will affect their product lineup for 2014 and whether it makes economic sense to seek renewals for cancelled plans or to instead focus on exchange-related or off-exchange opportunities separate from those policies.

In that light, the board of the California exchange, Covered California, voted 5-0 on Nov. 21 to reject extensions for these cancelled plans for one year, saying doing so would distort their efforts in implementing the ACA and confuse consumers trying to figure out their options for 2014. This puts California with other states like Massachusetts, Minnesota and New York that are operating their own exchanges and also said no to letting cancelled plans back into the market.

Covered California did, however, make moves to ensure the more than 1.1 million customers whose plans have been cancelled can get more direction on how to find exchange-based coverage. These changes include extending the deadline from Dec. 15 to Dec. 23 for enrollment in coverage taking effect on Jan. 1, 2014, and stretching the deadline for payments due from Dec. 26 to Jan. 5, 2014. The board also is establishing a telephone hotline for consumers to resolve enrollment questions, sending information directly to affected individuals that provides clear options for coverage, and engaging consumers in their communities through thousands of insurance agents, enrollment counselors and certified educators.

Still, other insurance departments and public exchanges, like in Florida and North Carolina where powerful Blues plans are supportive of extending cancelled plans, have said yes to reviving these once-dead plans even though doing so will take an enormous effort to finalize before year’s end. In all states, regulators and health plans are weighing a series of factors in their decision-making. Among them is the question of whether granting extensions will inflate premiums by sending older and sicker people to exchanges while healthier people get to keep their 2013 plans through 2014, negatively affecting the risk pool. Another question is whether carriers can resubmit rates to account for higher medical costs. For instance, Blue Cross and Blue Shield of North Carolina has asked regulators for premiums as much as 24% higher for these formerly cancelled individual plans.

“The big challenge is on the exchange side, because you are carving off a big chunk of the existing individual market that otherwise was priced to go on the exchange,” Brian Weible, vice president and actuary at Wakely Consulting Group, tells HPW.

Policy Shift Is Each State’s Call

In Kansas, Linda Sheppard, special counsel and health care policy and analysis director for the Kansas Insurance Department, tells HPW that it will be a “scramble” to get once-cancelled policies renewed in time for 2014. The state’s largest insurer, Blue Cross and Blue Shield of Kansas, said it would send out notices to around 10,000 policyholders that their previously cancelled plans can now be extended through next year. “Blue Cross did not have approved rates going into 2014 because they had not planned on selling these plans in 2014. So, part of what we’re working is on rate filings for those plans,” she says. “Certainly they will be adjusted higher for medical costs and age adjustments.”

For health insurers in Minnesota, a state that rejected the option to extend cancelled plans, it was “crucial” to not let such coverage back into the marketplace, Julie Brunner, executive director of the Minnesota Council of Health Plans, tells HPW. “We were clear in our letter to the governor it was not possible for us to make these changes and reinstate policies that no longer exist, provide notice and meet a Jan. 1 deadline. So, it was critical. Most importantly, we knew it would lead to huge confusion and potentially prevent people from finding coverage on the [MNSure] exchange,” she says.

With California’s rejection of Obama’s proposed plan extensions, 10 of the 51 insurance commissioners across the country, including Washington, D.C., said they would not comply with the president’s Nov. 14 policy change, according to a map compiled by America’s Health Insurance Plans. Twelve states have said they will give insurers the option of continuing to offer plans that were cancelled because they did not meet the ACA’s new minimum requirements. Most of the remaining states said they are still examining the policy change and conferring with insurers.

Where Do Insurers Go From Here?

What does this latest market confusion mean to insurers and their 2014 strategies? Dan Mendelson, president of Avalere Health LLC, says Obama’s proposal may not mean much. “I think at the end of the day, this is going to have a relatively small effect on the market,” he tells HPW. “I think about half of the insurance commissioners will decide not to allow this insurance in their states. And many of the policies will not be offered because they are unprofitable, and why would the insurance companies offer them? Frankly, most of these people who had these policies will be better off buying their policies on the exchange. A lot of them will be subsidized and the product is just a lot more stable.”

Henry Loubet, the chief strategy officer for Keenan, a California-based health care consulting and brokerage firm, and former CEO of UnitedHealthcare’s Western operations, tells HPW that the proposal “creates a lot of uncertainty in the marketplace…which I think is so unfortunate because there are so many good aspects of what is out there [in the ACA]. Insurers have taken a significant amount of risk with guaranteed issue, no medical underwriting and everything else, in addition to all the challenges of administering this.”

“There are definitely more challenges now because you are sort of fracturing the risk pools,” Dan Schuyler, head of the health insurance exchange practice at Utah-based consulting firm Leavitt Partners and the former director of technology at the Utah Health Exchange, tells HPW.

“And the carriers were planning on a certain group of people being in a certain risk pool if you will to be able to assess the risk adjustment and the reinsurance,” he says. “So now you could have this fragmentation where people will be in for the next 13 months....[That] makes it very difficult to assess how that risk is going to be shared throughout the marketplace. It sort of destabilizes those risk pools.”

If insurers see the cancelled policy renewals putting a dent in their exchange business because of the actuarial shifts, that “is definitely going to have an impact on costs. So it will be interesting to see how that affects what carrier are going to have to do to make up those costs come third quarter of 2014 when they start doing the projections for the renewals for 2015,” Schuyler says.

HHS Seeks More Carrier Website Traffic

Against the backdrop of these state-by-state assessments, the larger issue is if and when HHS can fix its faltering HealthCare.gov website for enrolling people on federally facilitated exchanges (FFEs).

The ACA already allows carriers to sell exchange-based coverage through their own websites, as well as via web-based entities. But HHS is working to make “it easier for insurance companies to enroll the full gamut of people directly,” Mendelson says. “It only makes sense, because while these websites are down you can call the insurers in your area and get coverage. There is nothing preventing them; these websites are just intermediaries,” he adds. “What they [HHS officials] are doing is facilitating the subsidy calculations by the insurers” in a go-around to take pressure off the still troubled HealthCare.gov site.

Agents and brokers can also be called on to play a larger role in the effort to boost enrollment in exchange-related products, according to Kathryn Gaglione, spokesperson for the National Association of Health Underwriters. “Agents can in essence stand in line for their clients. They can also fill out paper applications and look for plans outside of the exchanges. Even if someone qualifies for a subsidy, that doesn’t necessarily make it the best option. Many subsidies aren’t substantial, and there are other health and financial issues that might make the plans on the exchange impractical for some people,” she says.

Insurers and regulators did get some clarification on how to approach members who were previously told that their plans were cancelled. On Nov. 21, CMS issued a letter to state insurance commissioners outlining a transitional policy for non-grandfathered coverage in the small-group and individual health insurance markets. The document can be viewed at http://tinyurl.com/n3hqd7b.

© 2013 by Atlantic Information Services, Inc. All Rights Reserved.

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