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Plan cancellations no surprise

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The stumbling rollout of the Patient Protection and Affordable Care Act just hit another hurdle: Widespread reports the law is forcing millions nationwide to lose their insurance plans.

NBC News sounded the alarm this week when it reported more than 7 million people will lose their coverage as a result of PPACA’s new standards, coupled with normal market turnover.

Sources told NBC News 50 percent to 75 percent of those who buy health plans on the individual market would receive a cancellation letter in the next year, if they haven’t already.

Though some seemed shocked by the news, a number of insurance experts say there’s nothing new about the reports.

“We knew the market would be changing,” said John Greene, vice president of congressional affairs at NAHU, in Washington D.C. “I think what’s happened is that is D-Day is here and the new market reality is here.”

Greene said he couldn’t comment on the number reported by NBC in particular, but said PPACA has a big effect on existing plans, calling the changes to individual plans “intentional.”

PPACA requires all health plans to contain a basic level of benefits, such as preventive care services. Policies that don’t meet those standards won’t be permitted next year unless they existed in their current form in 2010.

For those in the know about the law, the numbers about existing plans were there all along, though they weren’t publicized before. Language in PPACA regulations from July 2010 stated “40 percent to 67 percent of people” in the individual market normally change plans in a year, and thus would no longer be in grandfathered plans.

“NBC ‘scoop’ cites ‘normal turnover in the indiv insurance market’. That’s a) not new b) not caused by #ACA c) the problem #ACA will solve,” White House principal deputy press secretary Josh Earnest tweeted Monday.

David Smith, vice president of health and welfare benefits at North Carolina-based Ebenconcepts, says the reports are overhyped.

First of all, he said, “some carriers aren’t canceling policies because of the Affordable Care Act; they’re canceling policies because they want to cancel policies,” he said.

It’s basic market turnover, he said, and that alone skews some reported numbers.

“From an efficiency perspective, [carriers] don’t need to carry 50,000 policies that have 50 people on them,” Smith said. “Is that always easy for people on them today? It’s not. But they have other options.”

Plus, Smith noted, some policies were sold in the last three years when the carrier already knew their policy would have to go away eventually because it didn’t meet PPACA requirements.

Smith also said that consumers, generally, will get richer, more comprehensive benefits with new policies that meet the new requirements, a similar point the White House made this week. With their cancellation notices, many carriers are issuing new policies to individuals, though premiums are naturally higher for the new plans.

But the cost might be worth it, some argue: For instance, a consumer might have previously had to pay for hospitalizations or maternity care out-of-pocket, whereas a new plan that meets PPACA requirements might cost more, but will cover those benefits.

Gene Ramsay, a benefits consultant in Birmingham, Ala., and president of the Birmingham Association of Health Underwriters, says that reports of a large number of people losing coverage could be premature. But it’s still cause for concern.

“I think some of those numbers are people jumping the gun,” he said. “But, at the end of the day, I agree there will be a lot of people with individual coverage who will be sorely, sorely disappointed in what happens to their premium — and their plan — come Jan. 1. And they don’t have a choice. They either have to accept it, or go to the exchanges.”

Consumers, as Ramsay points out, are the ones most affected by these reports. Though the administration knew some would lose their plans under PPACA, most were left in the dark.

After all, President Obama vowed repeatedly that, under his signature health care overhaul, those who liked their plans could keep them. 

“One of the most important promises made by President Obama … was that Americans who were satisfied with their health plans could keep them,” Sen. Ron Johnson, R-Wis., said in a statement. “That promise has been broken.”

Ramsay says the reports about the cancellation notices are still alarming. 

“If an individual is willing to pay the premiums they’re paying in their existing coverage, to me, they’ve already met the requirement of what the government is asking them to — which is to acquire health insurance. So why in the world should I be forced to not only have it…but now I can’t keep my plan, and [carriers] are going to make me go to an equivalent plan and charge me for it?”

Last week, Florida Blue announced it was dropping 300,000 customers whose policies the carrier says aren’t sufficiently comprehensive under PPACA. Rep. Gov. Rick Scott — a continual critic of PPACA — said at the time that the carrier’s actions show not everyone is able to keep their plans as promised.

That followed other similar carrier moves: Kaiser Permanente in California cancelled 160,000 policies, about half of its individual policies in the state; Highmark in Pittsburgh announced it was withdrawing five of its insurance plans that don’t comply with the law; Independence Blue Cross cancelled 45 percent of its individual policies in Philadelphia.

Regardless of its consequences, the hype over coverage loss is still more bad news for an administration already struggling with the faulty exchange launch.

PPACA’s website woes have resulted in apologies from federal officials and promises the site will be completely operational by mid-November.

The website glitches, Smith said, is more of a problem than the reports of cancellation notices.

“I think people are panicking about the wrong thing,” he said. “The website is thoroughly complex, and no one knew about how complex it was until it was too late. [Fixing it] is what we need to focus on.”

Ramsay concurs the changed or cancelled policies aren’t the end of the world. 

“For people who are frustrated, though, there are individual options out there,” he said. “And we in the industry, we can help them find what’s best.”


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