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No Easy Fix in Scramble to Extend Canceled Health Insurance Plans

By Emily Ethridge and Melissa Attias, CQ Roll Call

November 8, 2013 -- Allowing more consumers to keep health insurance plans that do not meet the health care law's requirements looks to be a difficult problem for the administration and Congress to solve.

Republicans have pressured President Barack Obama on the announced plan cancellations, saying they violate his promise that people who liked their current insurance could keep it. Obama recently indicated that he would look into ways to allow more people to keep their current coverage.

In addition, the House will vote on a Republican plan to do that on Nov. 15 and two more measures in the Senate, including one from Democrat Mary L. Landrieu of Louisiana, share the same goal.

Another idea suggested by one health policy expert is that the administration could offer subsidies to consumers who would experience large price increases with new health plans.

Despite all that interest, there appears to be no easy fix to the issue. Changing the requirements of the health care law (PL 111-148, PL 111-152) to allow more plans to continue would put insurance companies in a messy situation, experts say. In addition, some Democrats are not supportive of the idea, saying that continuing the subpar insurance plans would be bad for consumers.

"The President or the Congress could wave a magic wand over this cancellation problem and say, 'Never mind,'" said Robert Laszewski, an insurance industry consultant, in an email. "But it is a lot more complicated than that. Ironically, while the Obama administration is not ready for Obamacare, the insurance industry is."

Under the law, consumers who have plans that were in effect before the law's passage can keep them, as they would be grandfathered plans. However, non-grandfathered plans are subject to the law's minimum benefit requirements and consumer protections, and any plans that changed significantly and don't meet the requirements must be canceled.

Obama has apologized to people whose plans are being canceled, and said in an interview with NBC News that he had asked his team to "see what we can do to close some of the holes and gaps in the law."

He did not speak to specific legislative fixes, including a Republican bill (HR 3350) the House plans to vote on that would allow people to keep their plans for another year. House Democratic leaders plan to oppose the measure, according to a leadership aide.

Yet even if members of Congress and the administration were to line up behind a proposal to stop plans from being canceled, it's unclear whether insurers would actually be able to make it happen.

Laszewski notes it has taken months for insurers to get their computer systems and insurance plan and rate filings ready for Jan. 1. Resetting the old policies that are being cancelled in the computer systems would also take companies months, he said.

"Each company would have to reset each of thousands or hundreds of thousands of policies by Jan. 1" said Laszewski, president of Health Policy and Strategy Associates, Inc. "I don't see how they could do it."

G. William Hoagland, senior vice president at the Bipartisan Policy Center, agreed that it could be an "administrative nightmare" for insurers if people have been terminated, although he said he thinks it could be overcome. His bigger concern is the "unintended consequences" on premiums for 2015.

Hoagland, a former vice president at Cigna, said large companies who had their actuaries develop their premiums for the 2014 enrollment period likely made assumptions that consumers whose plans are being cancelled would enroll in plans on the exchanges. That would spread the risk for their pool, he said. But if insurers do not get the enrollment of this population that they expected, he added, that could cause 2015 premiums to be "adjusted upward."

Meanwhile, America's Health Insurance Plans spokeswoman Clare Krusing said in an email that the group has "a number of concerns" about how allowing people to keep their current plans would work.

But she also said that current policies do not have to comply with the new requirements until they renew throughout next year. She said insurers in many cases are allowing people to renew their current policies this fall so they do not have to change coverage until a year from now.

To avoid those problems for insurers, the administration could take a different path. Rather than allow the current policies to continue, the administration could offer subsidies to people who are losing their current coverage and would see a large increase in premium costs for a plan on the exchange.

Dan Mendelson, president of the consulting firm Avalere Health, says that providing subsidies would be beneficial to the administration because it would increase exchange enrollment. It also would address the risk pool issue.

"Enroll a lot of people in these plans, and people are basically okay with the insurance, then they've succeeded and they can move on to fight the next fight," said Mendelson, a former Clinton administration official.

"Giving people money usually works," he added.

During the NBC interview, Obama said he wanted to make sure people could afford the more comprehensive plans on the exchanges.  "We are proud of the consumer protections that we put into place. On the other hand, we want to make sure that nobody is put into a position where their plan has been cancelled, they can't afford a better plan," Obama said. "So we're going to have to work hard to make sure that those folks are taken care of."

That move to provide subsidies would also prevent Obama from having to continue plans he described as "subpar" and lacking the law's required consumer protections and minimum benefit standards.

"I don't believe that it is realistic to expect that everyone's going to be able to keep their coverage that they had in the old world," said Mendelson. "A lot of that old world coverage is prohibited because the administrative costs are so high, the benefits are inadequate."

In any case, congressional Republicans are moving ahead with the bill, from Michigan Republican Fred Upton, that would allow insurers that provided coverage in the individual market as of Jan. 1, 2013, to continue to offer that coverage in 2014 outside of the new insurance exchanges. The bill would also allow those plans to be treated as grandfathered plans so people who keep them would not be subject to individual mandate penalties.

A House Rules Committee aide said the legislation is likely to be considered under a closed rule, which would block lawmakers from offering amendments on the floor.

But even as some Democrats have expressed concern about constituents losing their coverage, that doesn't mean they're on board. House Democratic leaders indicated to their conference they would oppose the bill, according to a leadership aide, who said in an email that the measure "would not strengthen the health care reform law, but instead aims to undermine it."

Still, the Upton bill could be more palatable to insurers than Senate legislation (S 1642) by Landrieu. That measure would allow an individual to keep the coverage they were enrolled in on Dec. 31, as long as the person meets requirements like continuing to pay premiums, or unless the insurer cancels all of its coverage on the individual market and stops operating as an insurer.

While the Upton bill would allow insurers to continue the coverage, Landrieu's appears to require them to do so in most cases. And the Upton proposal permits the plans to continue to be sold only through 2014, while Landrieu's doesn't specify an end date. Co-sponsors of the Landrieu bill, all Democrats, are Kay Hagan of North Carolina, Joe Manchin III of West Virginia and Mark Pryor of Arkansas.

The goal of both the Upton and Landrieu measures is also similar to another Senate bill (S 1617) from Wisconsin Republican Ron Johnson.

Hoagland said he is positive that the administration would prefer that relief be provided through the regulatory process rather than legislation. Not only would legislation take some time, he said, but it could also open the door to other issues that members would like to fix. He also noted that given the degree to which the administration has found flexibility in the law so far, he would be surprised if they couldn't find a way to act on this without Congress.

Upton, however, said that regulatory action would not be acceptable.

"Rather than another regulatory patch or holiday weekend blog post the president ought to embrace the bipartisan call for legislative action to allow Americans to keep the health plans they know and like, and can afford," he said in a statement about his bill.

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