Adjusting to the new contours of the ACA
President Barack Obama pauses as he speaks on the Affordable Care Act in the Brady Press Briefing Room of the White House on November 14, 2013 in Washington, DC. Obama said Thursday that Americans should be allowed to keep canceled health plans for an extra year as he acknowledged a 'rough' start to reforms.
What's the big deal with extending old insurance policies?
"It’s a serious challenge," says J.B. Silvers, health finance professor at Case Western Reserve University. "I was CEO of a health insurance company and I wouldn’t be very happy right now."
There are a few reasons:
"There is all sorts of every day minutiae involved in the insurance industry," says Monica Lindeen, Commissioner of Securities and Insurance for the state of Montana. "Insurance companies have to actually look at new rates for those plans if they are going to be continued, which means they have to come up with a rate which has to reflect medical inflation, new provisions, fees or taxes, and once they have done all this work which they would have normally done five months ago then they file those rates with insurance departments in their states, which then have to inform the consumer so you can see our problem just in the practicality."
She adds: "These are things that our federal government doesn’t think about."
"You set your rates based on the expectation of who’s going to enroll and what your costs will be," says Silvers. That’s all now up in the air.
The people whose policies were cancelled were generally-healthy people who were paying for barebones policies that didn’t cost much – for them or for the insurance companies. They were cancelled because they were substandard in the eyes of the Affordable Care Act. Insurers expected those healthy people to join the exchanges and get better, but more expensive policies. If the old policies were extended, these healthy people may not move over.
At the same time, guess who will join the exchanges? Poor people and sick people. Without millions of healthy people in the system (because they stayed with the old policies), costs will go up for insurance companies, and possibly premiums too.
"So in reality, you may have a sicker pool, which then is going to raise rates on all those folks in 2015," says Lindeen.
Just because people can keep their old policies, doesn’t mean they will. Vivian Ho, professor of health economics at Rice University, says that creates uncertainty for a health insurance company.
"How do I figure out what premium to charge these customers cause i just don’t know which of them are going to stay with me and which are going to leave?" says Ho.
Not to mention the logistical challenge of having multiple sets of rules for multiple groups of people.