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Democrats Try to Shift Cancellation Controversy to Battle over Individual Market

By John Reichard, CQ HealthBeat Editor

October 30, 2013 -- Republicans have pursued one line of attack after another on the health law since its 2010 passage without much success—until now.

The current wave of cancelation notices going out to policyholders in the individual market has led to complaints from around the country that people are being forced to pay higher premiums to enroll in new plans they don't want.

News reports increasingly echo the Republican charge that this shows President Barack Obama lied to the public when he said that under the health law, Americans can choose to keep their current coverage.

But Democrats at a recent House Energy and Commerce Committee hearing pushed back hard at Republican efforts to use the issue to weaken public support for the health law (PL 111-148, PL 111-152) and force a delay in its 2014 requirement that people carry health insurance or pay a penalty.

Health and Human Services Secretary Kathleen Sebelius highlighted deep flaws in the individual market in her testimony at the hearing. She said the health law would correct them. Committee Democrats agreed with her and attempted to blunt the attacks by putting Republicans in the position of defending the individual market.

It's a tactic that could work. But Democrats won't be able to get around the fact that next year, a significant number of Americans—though fewer than some might suggest—are going to have to pay much more for their health benefits and that people will blame it on the health law.

Although it appears their discontent won't be enough to change the law in coming months, it could have an eventual impact on the overhaul by shaping the way people vote in the 2014 elections, though whether it will give Republicans a big leg up with voters is uncertain.

Estimates, Anniversary Dates Vary

How many Americans are affected?

Some estimates put the number as high as 19 million. But the Kaiser Family Foundation estimate is closer to 10 million. Some of those people have begun getting notices that their current coverage will end on Dec. 31 because it doesn't comply with the health law's essential health benefits standard, which takes effect in 2014.

The Health Insurance Portability and Accountability Act of 1996 (PL 104-191) requires an insurer that intends to terminate a policy and that plans to continue in the individual market to give policy holders 90 days notice. That means people whose annual coverage expires Jan. 1 and it doesn't comply with overhaul's requirements are now getting notices that their current policy won't be renewed.

But Karen Pollitz, an individual market analyst with the Kaiser Family Foundation, says "the anniversary dates are all over the place" in the individual market. That means not everyone in that market must find a new plan by Jan. 1.

Florida Blue Cross Blue Shield, which says it's ending the current policies for 300,000 customers because the coverage doesn't meet the 2014 health law standards, says it's only notifying 40,000 of its enrollees that they must find new coverage by Jan. 1 because that's the number of policies that are expiring then.

Other factors also will stagger the impact of the health law on people covered in the individual market. As an "educated guess," Pollitz says maybe one-third of the people in the market have grandfathered plans, meaning they haven't changed sufficiently since the March 2010 passage of the health law to require them to be cancelled. So those enrollees can keep their current coverage if they want.

Also, some people will automatically be enrolled in a new plan, Centers for Medicare and Medicaid Services spokeswoman Julie Bataile said in a press briefing last week. That would prevent a break in coverage Jan. 1 if they don't enroll in a new plan by then. But they'd have to be willing to pay the new premium charge.

It's unclear how many policy holders would be automatically enrolled in a new plan. Plans are not required to do auto enrollment, Pollitz said. The Florida Blue Cross Blue Shield plan and the Alabama Blue Cross Blue Shield plan does do auto enrollment, she noted.

Pollitz says some of the people in the individual market will find cheaper coverage in the health law exchanges. And about half of the people in the individual market will qualify for subsidies to help offset coverage costs, which means many of them also would pay lower premiums. But in many other cases people will have to pay more.

Some insurers "are giving people a one-time opportunity to renew," Pollitz said. They're saying that whatever their anniversary date would otherwise be, "I'll let you renew one more time in December of 2013 and that way you can keep your old policy all the way" through 2014 and get rid of it in 2015.

Meanwhile, Democrats at last week's hearing sought to take the sting out of the Republican attacks by noting that sharp premium increases and frequent changes in the provisions of individual policies have been a hallmark of the individual market long before the health law passed.

"It was unprotected, unregulated, and people were really on their own," Sebelius said of the individual market prior to the health law. "This market has always been the Wild West." Under the overhaul "they have choices they never had before."

It was also a market where people could see their policies canceled if they got sick and in which contracts typically lasted only 12 months and then could be terminated.

And in general, it hasn't been a source of long term coverage, Sebelius said. One third of policyholders in the individual market leave it in less than six months and one half stay in a year or less, she added.

Now women can't be charged more than men, people can't be denied coverage for preexisting medical conditions, their coverage can't be taken away and it will offer comprehensive benefits, she said.

"The worst abuses of the insurance industry will be halted," declared Rep. Henry A. Waxman, D-Calif. Never again will people's premiums rise just because they get sick, he said.

Democrats also said that health plans aren't losing their grandfathered status because of the health law, but because insurers make changes in their plans each year. In other words, people can't keep their current coverage not because of the health law but because of actions by their insurers.

Joel Ario, who handled exchange development early in the Obama administration, said in an unprompted email message during the hearing that "As a former [Pennsylvania] Insurance Commissioner, I know that there is nothing in the ACA requiring insurers to cancel policies that were in place when the law passed." Ario added that "those who are upset about policy cancellations should focus on their insurer not the ACA."

But Rep. Marsha Blackburn, a Republican from Tennessee, reminded Sebelius "some people like to drive a Ford, not a Ferrari ... You are taking away their choice."

And Republican after Republican said they've been getting calls from constituents who are facing sharp hikes for insurance because their current policies are ending. They can't find policies that don't charge more, a number of Republicans said. They asked Sebelius what they should tell those constituents.

One lawmaker asked what he should tell a constituent named Sean who faces sharply higher premiums because of a cancellation notice.
Sebelius said Sean should go shopping on the marketplace. But not all of the "Seans" will find comparably priced coverage there and anger over cancellation notices isn't likely to fade away any time soon. And with the ongoing problems with the federal exchange, it's unclear how many of those affected will be able to find new insurance by Jan. 1 to avoid a break in coverage.

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