Plans waiting on decisions before extending policies

November 14, 2013

In California, the commissioner and the exchange must reach an agreement

On November 5, Blue Shield of California agreed to allow existing policy holders of non-grandfathered plans to extend their coverage until March 31, 2014. The state department of insurance allowed the extension, however, it has not yet decided on whether to allow California insurers to extend plans through all of 2014.

The trouble is, Covered California, the state-run exchange, included a stipulation in its contracts that required participating health plans to discontinue their non-grandfathered policies. Until it receives approval from the state insurance commissioner and a change with the agreement with Covered California, Blue Shield will have to wait.

When President Obama this week bowed to public pressure regarding the estimated millions of plan cancellations, it opened up the option for insurers, with the approval of insurance commissioners, to extend the existing plans.

According to Blue Shield, extending coverage is confusing for members already unsure of significant changes in the market.

 “There was some confusion with people who bought individual policies after March 2010 who believed that they could keep it,” said Paul Markovich, president and CEO of Blue Shield of California, in an exclusive interview with MHE after the initial plan extension. “What’s happening now is health plans, in order to be compliant, are bringing all of their products and plans up into compliance with the minimum benefits established in the Affordable Care Act, and are saying, ‘I have to drop that plan, and I have to map you to a new plan that’s ACA-compliant.’”

He believes structuring health reform so grandfathered plans could only date from 2010 or earlier made sense to shore up the risk pool in the exchanges.

“If you allowed grandfathering all the way up until December 31 of this year, the types of people who prefer a leaner benefit and a lower price are the kinds of folks that don’t see themselves using services,” he says. “So you can certainly imagine a much younger, healthier population signing up for a grandfathered plan at a lower price point and not joining those exchanges or dropping the policy and joining the richer plan once they had a health issue.”

Blue Shield and other health insurers are referring to the recent statement from America’s Health Insurance Plans regarding industry sentiment toward Obama’s announcement to allow year-long extensions. Most plans believe an extension would unravel the market and cause adverse selection in the exchanges.