On several occasions, the President told the American people that if they like their health insurance policy purchased in the individual market, they can keep it. Unfortunately, the President’s statement did not square with the framework under the Affordable Act. As CMS explained in a recent publication, only grandfathered policies in effect prior to March 23, 2010, are exempt from many of the 2014 requirements under the Affordable Care Act. The net result is that those individuals who are covered under a non-grandfathered policy will need to transition to a new policy that complies with the 2014 requirements. Last Thursday, the President issued an apology to the significant number of affected individuals and is considering options to address this outcome. Let’s be clear, however, that this result was a necessary and predictable one, and any attempt to change the outcome could undermine the Affordable Care Act.
Many individuals may want to keep their existing policies because they are comfortable with their current monthly premiums. However, these premiums may be artificially low because millions of people with underlying illnesses are currently excluded from participating in the individual market. When individuals covered under existing policies transition to new policies that comply with 2014 requirements, some may experience an incremental increase in premiums because now every American has the opportunity to purchase coverage regardless of health status and risk will be shared across the entire individual market population in each State – two fundamental goals of the Affordable Care Act.
In the individual market today, health insurance companies are allowed to discriminate against consumers who are looking to purchase a policy. Individuals who are healthy pay lower premiums than those who have minor to moderate underlying illnesses, and those with serious illnesses are denied coverage outright. But it’s simply unacceptable that, in a modern civilized society, adults and children should be discriminated against and denied coverage because they have been diagnosed with diseases such as cancer, hemophilia, heart disease, and diabetes. The Affordable Care Act addresses this unfortunate tragedy by requiring health insurance companies to issue policies to every person, regardless of their health status.
To accomplish the goal of providing affordable access to all Americans in the individual market, the Affordable Care Act requires guaranteed issue, creates a single risk pool in each State, and generally requires health insurance companies to calculate premiums equally for all individuals. The result of these policy choices is that risk is shared equally across the insured population – individuals who receive fewer health care services may pay more in premiums as compared to the cost of services received, whereas individuals who receive more health care services may pay less in premiums as compared to the cost of services received. Since most, if not all, of us will access health care services at various points in our lives, the risk each of us bears in terms of premiums paid should even out in the end.
The purpose of this blog is not to address whether these policy choices are the appropriate ones, but to shed light on how allowing individuals to keep their existing policies at existing premium rates in the individual market undermines them. First, these individuals are adequately protected under the Affordable Care Act today. Many of them will be eligible for premium credits that will significantly lower the cost of their coverage. In fact, Kaiser estimates that approximately 17 million people will be eligible for premium credits in the individual market. Further, if transitioning to a 2014 compliant policy results in a premium increase that exceeds 8% of an individual’s income, he or she may be eligible for a hardship exemption and qualify to enroll in a lower cost catastrophic plan. The Administration should consider creating a separate consumer assistance hotline dedicated to assisting affected individuals with taking advantage of these protections and finding a new 2014 policy that is comparable to their existing coverage.
More importantly, the success of a State single risk pool depends on all individuals being included. The only way to insulate individuals covered under existing policies from premium increases would be to allow them to continue their policies and exclude them from the single risk pool. But excluding this critical mass of people may create an imbalance in a State’s single risk pool because there will be a smaller population across which risk can be spread. This imbalance could lead to an unintended increase in the premiums for policies that comply with the 2014 requirements, which could then lead us right back to where we started – discrimination against the millions of individuals who have previously been denied coverage. While these individuals will finally have access to coverage in 2014, they may end up paying more in premiums in order to accommodate those individuals who were fortunate enough to be able to purchase coverage prior to 2014. If the Administration takes this approach, the President runs the very real risk of breaking his overall promise to the American people at large that they will have equal access to affordable health insurance.
So let’s accept the President’s apology and move forward by promoting and implementing the protections under the Affordable Care Act in place today.
Editor’s Note: Subsequent to this blog being posted, President Obama announced a “transitional” policy to allow insurers to continue coverage that otherwise might be cancelled. A link to a CMS letter to Insurance Commissioners explaining the policy is available here.