Cancellation notices go out for non-ACA compliant health insurance plans prior to opening of second enrollment period

October 21, 2014

Enrollees in health insurance plans that don’t comply with the Affordable Care Act (ACA) have begun receiving notices of cancellation, one year after getting a reprieve.

Enrollees in health insurance plans that don’t comply with the Affordable Care Act (ACA) have begun receiving notices of cancellation.

Many are the result of last year’s reprieve that allowed policyholders to retain non-compliant plans for an extended period of time. 

In Virginia, up to 250,000 residents could receive notices by the end of November, accoordinf to the Roanoke Times.

In New Mexico, about 30,000 residents began receiving notices in October, according to the Albuquerque Journal.

About 22,000 Colorado residents, most affiliated with Humana, have begun receiving cancellation notices, according to Politico. Not all notices are the result of ACA non-compliance, though, and Poltiico notes that Humana could have continued its plans through 2015.

In Kentucky, 14,000 people, mostly enrolled in plans from Humana, were notified by October 1, according to the Morning Consult, while about 800 Alaskans recently received cancellation notices, according to the Associated Press.

READ: Sticking your neck out for ACA extensions?

The ACA set minimal essential coverage standards that all plans were supposed to meet by January 1, 2014, according to the U.S. Centers for Medicare and Medicaid (CMS). But the compliance date was pushed back by at least a year depending in the plan and state after millions of cancellation notices issued last fall caused a consumer backlash and led to the temporary reprieve. Some states gave a one-year reprieve for plans to become ACA-compliant, while others granted a two-year extension.

Insurers do not have to wait until the end of the grandfathered period to issue cancellation notices, notes the CMS, and some insurers like Humana in Colorado are cancelling policies early.

In some cases, insurers may be cancelling because they can realize more revenue by selling ACA-compliant plans at higher premiums that are subsidized by tax credits, insurance industry consultant Robert Laszewski toldKaiser Health News.

 “They’re getting a lot more revenue, often for the same person,” he said.

 “We all knew this day was coming that insurance companies would transfer to plans that were fully compliant with ACA,” Carmen Balber of Consumer Watchdog, a Santa Monica, Calif.-based advocacy group, told KHN.  “That’s a good thing. We supported the delay a year ago because consumers didn’t have the time or ability to appropriately shop for plans … But it’s time.”

CMS and health insurers say that new plans, including narrow network plans, can offer enrollees more value.

Those receiving cancellation notices can switch to another plan with the same insurer or buy a new plan through the federal Marketplace during the second open enrollment cycle, which opens November 15.