News that health insurers are ending the policies of what might be millions of Americans has rattled consumers and added to the debate over the new health care law.
If you or a family member has been notified that your individual policy is being canceled at year’s end, you may be stunned and upset.
Republicans in the House of Representatives sparred with Health and Human Services Secretary Kathleen Sebelius on Wednesday over the cancellations, with Sebelius saying the law generally didn’t require insurers to discontinue plans that were in effect at the time of the law’s enactment in March 2010.
No one knows how many of the estimated 14 million people who buy their own insurance are getting such notices, but the numbers are substantial. Some insurers report discontinuing 20 percent of their individual business, while other insurers have notified up to 80 percent of policyholders that they’ll have to change plans.
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Here’s a guide to help you understand the bigger picture, including why your premiums and benefits are likely to change next year and what you should consider as you shop for a new policy.
Q: Why are these cancellations happening?
A: The health care law targeted the so-called individual market because it didn’t work well for many people who don’t get coverage through employers, particularly those who were older or had health problems. The latter often were rejected for coverage, were charged more or had their conditions excluded from coverage. Some policies provided only the barest of coverage when someone did fall ill.
Starting Jan. 1, insurers no longer can reject people who are sick or charge them more than the healthy under the Affordable Care Act. They also must beef up policies to meet minimum standards and must add benefits such as prescription drug coverage, maternity care and mental health services.
If you got a cancellation notice, most likely your plan didn’t meet all the new standards. One type of policy being discontinued by Florida Blue, for example, didn’t cover hospitalizations or emergency room visits and paid a maximum of $50 toward doctor visits.
It’s possible that your plan also had deductibles and other potential expenses – such as co-payments for doctors and hospital care – that exceeded the law’s annual out-of-pocket maximum of $6,350 for individuals or $12,700 for families.
Some policies that fail to meet the law’s standards may still be sold if the insurer decides to continue them and if they’re “grandfathered,” meaning that you purchased one before March 2010 and neither you nor the insurer has made any substantial change since then. Adjusting an annual deductible, which many people do each year to keep premiums down, is a change that could end grandfathered status.
Q: How are insurers picking the policies to discontinue?
A: Some consumers fear they’re being targeted because they’re unhealthy or otherwise unprofitable for an insurance company. Kansas Insurance Commissioner Sandy Praeger said insurers could discontinue only entire blocks of business and couldn’t pick and choose certain customers to cancel. Those whose policies are canceled may sign up instead for new plans and can’t be rejected because of their health. Insurers say they’re ending policies that don’t meet the law’s standards or weren’t grandfathered.
Q: My insurer says that if I renew before the end of the year, I can keep my current plan. What does this mean?
A: In some states, insurers are offering selected policyholders a chance to “early renew,” meaning they may continue their existing plans through next year, even if they don’t meet all the law’s standards. If you choose this option, your premium might still go up, but the cause would be medical inflation, rather than the need to add benefits because of the health law. Not all states allow early renewals. Fearing that insurers would offer such renewals only on their most profitable plans, a handful of states – including Illinois, Missouri and Rhode Island – barred insurers from doing it.
Q: Why are premiums changing?
A: Under the old rules, insurers could decide whether to accept you – and how much to charge – based on answers to dozens of medical questions. You no longer have to fill out those forms. Starting Jan. 1, insurers no longer can charge women more than men, or reject people who are sick or charge them more. They can charge older people only three times more than younger ones. They’re also adding new benefits.
As they drew up the rates for 2014, insurance firms had to make educated guesses about how many customers would stay, how many new ones they would attract – and what the health conditions of those new members might be. Actuaries say the new rules on how much insurers may vary rates level the playing field, making premiums more of an average. Older buyers or those who had above-average health problems – and whose former rates reflected those problems – may find their premiums going down. Younger or healthier people, on the other hand, may find premiums going up, sometimes sharply.
Under the new rules, consumers “are not paying based on their own health status, but an average health status,” said Robert Cosway, an actuary with the consulting firm Milliman. “The positive side is that people in poor health won’t have to pay as much, but the way you get there is that people in better health have to pay more.”
Q: I don’t qualify for a subsidy, and my premium is going way up for what the insurer tells me is a comparable policy. Why is that?
A: Insurers base premiums on a number of factors, including medical inflation and the cost of implementing insurance rules. A report by Cosway on the California market estimated that medical inflation and changes from the health law could add about 30 percent to the average premium in California. The biggest chunk of the increase was attributed to insurers being required to accept everyone, even those who are ill. That requirement polls well with the public. But it makes insurers nervous because they no longer can reject the costliest patients.
Q: I’m healthy. Why do I have to pay for people who are sick?
A: Except for a fortunate few, everyone is likely to develop some kind of health problem or face an accident sometime in his or her life. Policy experts and regulators say insurance works best when it spreads the risk across a large group of people. Your house may not burn down this year, but you pay for insurance coverage just in case.
Q: I’m a single man. Why do I have a plan with maternity coverage?
A: Again, it’s about spreading the risk. Men may not need maternity care, but women don’t need treatment for prostate cancer and those costs are baked into the rates, too. Older men and women past childbearing age are more likely to need treatment for heart disease, artificial hips or other illnesses that younger men and women are less likely to need. “The whole concept of insurance is you can’t just pick and choose the benefits you want,” Praeger said. If people – especially older ones – get premiums based solely on what they might need, she said, “it could cost a whole lot more.”
Q: What if it turns out they’ve charged too much for the new coverage?
A: Under the health law, insurers who fail to spend at least 80 percent of their premium revenue on medical care must issue rebates to consumers. Rebates for 2014 policies wouldn’t be seen until 2015, however.
Q: What should I do now that I’ve gotten a cancellation notice?
A: Experts say people should scrutinize the terms of their soon-to-be-discontinued policies and compare them with what new policies offer. The monthly premium is just one factor in cost. Also note the deductible. Is it per person? What’s the maximum deductible if two or more family members fall ill in the same year? Finally, note the annual out-of-pocket cap, which is the maximum you’d pay in deductibles and co-payments for medical care during the year.
An independent broker can show you plans from various carriers. You also can check your state’s online marketplace or log onto or call healthcare.gov, the website serving the 36 states that opted not to create their own marketplaces.
While consumers are having trouble creating accounts through the healthcare.gov site, it now allows shoppers to browse plans without creating accounts.
When browsing, however, be aware that the premiums are not actual quotes, because they don’t reflect your exact age. Nor do they show subsidies, although several online calculators – including some on state marketplace websites and another by the nonpartisan Kaiser Family Foundation – can give you a good idea of how much you might receive toward coverage, based on your income.