Health Insurers Express Worries Over Obama Shift on Policy Cancellations

From The Wall Street Journal:

The president's move to placate millions of Americans on Thursday rattled health insurers, who said they were unsure how to revive canceled policies in short order.

While companies had expected the White House to address the white-hot issue of policy cancellations, President Barack Obama's decision to let people keep their old policies undercuts years of preparations for the overhaul of the health-insurance market and introduces new uncertainties.

 

It was unclear how many insurers would follow the president's lead and start offering again plans they had canceled or planned to cancel for as many as 10 million consumers because those plans didn't provide the same level of health coverage required under the 2010 health-care law. Mr. Obama's proposal wouldn't require insurers to resurrect terminated policies, but gives them the choice to do so.

 

It also means significant new risks for the insurance industry if the change is carried out. If old plans are restored, "fewer healthy people and younger people would be leaving their current plans," said Jim O'Connor, a Milliman Inc. actuary who advised health plans on setting rates for the exchanges. Meanwhile, he said, the sickest people now in the individual market would likely see lower prices through the exchanges and move to those plans.

 

"The exchanges are likely to be left with a less healthy distribution than they otherwise would have been," Mr. O'Connor said.

Insurers depend on a broad cross section of customers to sign up for exchange products, because under new pricing rules, sick and healthy people will pay the same rates. That means they need to sign up more healthy customers to offset the costs of less healthy ones.

 

Whether extending the old plans makes business sense to insurers, actuaries said, depends on whether they are allowed to set new rates for both the exchange health plans and the restored health plans, which can often be a six-month process. "It will be very difficult, if not impossible," for insurers to file rate changes and get them approved in time for 2014, Mr. O'Connor said.