A new fight is brewing over health insurance companies letting millions of Americans renew their current coverage for another year — and thereby avoid changes under the federal health care law.
That may offer a short-term benefit for certain consumers and shield some of those individual policyholders from potentially steep rate increases. But critics say this maneuver could undermine government efforts to remake the insurance market next year and keep premiums affordable overall.
At issue is a little-known loophole in President Barack Obama's landmark legislation that enables health insurers to extend existing policies for nearly all of 2014. This runs contrary to the widespread belief that all health insurance must immediately comply with new federal rules starting Jan. 1, when most provisions of the law take effect.
“Insurers are on to this, and the big question is how many will try to game the system,” said Timothy Stoltzfus Jost, a law professor and health policy expert at Washington and Lee University.
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Some of the nation's biggest health insurers are looking to take advantage of this delay, and Arkansas officials are encouraging companies to do this by resetting customers' renewal dates for the end of December. There's also concern that some insurers and agents could rush to sell more individual policies before year-end so they could be extended in 2014.
Some policy experts are expressing concern about this practice for fear that insurers will focus on renewing younger and healthier policyholders and hold them out of the broader insurance pool next year. Their absence could leave a sicker and older population in new government insurance exchanges, driving up medical costs and premiums there.
“This could undermine the Affordable Care Act, and it opens the door for exacerbating potential rate shock in the exchanges,” said Christine Monahan, a senior analyst at Georgetown University's Health Policy Institute. “The health insurers can cherry-pick some healthy people, and it raises prices for everyone else.”
This issue could affect some of the 15 million people nationwide who purchase their own coverage and millions more of the uninsured who are expected to join government exchanges next year. It would not pertain to the 150 million Americans who get health benefits through their employers.
Many health insurers are still mulling over their options on how to handle these individual renewals.
WellPoint Inc., the Indianapolis insurance giant that runs Blue Cross plans in 14 states, said its renewal practices will vary by state. Kaiser Permanente, a major nonprofit health plan, said it doesn't plan to renew policies beyond Jan. 1 in most of the states where it sells coverage.
Richard Kern and his wife, a retired couple in Los Angeles, say they would welcome the flexibility to keep their individual policy from Aetna Inc. for another year amid so much uncertainty over next year's rates.
“We don't even know what the prices and alternatives are under Obamacare,” Kern said. “We are waiting for the other shoe to drop.”