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Insurers' cat-and-mouse game with Obamacare

Cat-and-mouse

No sooner did President Obama announce that the Affordable Care Act will allow insurance companies to extend their cancelled health plans to subscribers for another year, than the insurance industry struck back.

When it became clear that the Affordable Care Act was the law of the land, insurance companies retooled their health plans to create sustainable profit margins using the new ACA rules. For example, where before an insurer could guarantee higher profits by excluding people with preexisting conditions who use more healthcare resources, companies began pruning their provider networks to negotiate health services at the lowest possible cost. 

In order for the new plans to work, insurance companies need to get people to move from their existing plans, so they sent out "cancellation notices" to many of their subscribers, including 300,000 in Florida.

In the ensuing uproar, the loudest voices weren't those of the cancelled policy holders, but of the insurance industry blaming the Affordable Care Act for the switcheroo, and the GOP blaming the president for breaking his now famous promise, "If you like your health plan, you can keep it."

Here's a quote from Karen Ignagni, president of America's Health Insurance Plans, via the Washington Post:

“Making sure consumers have secure, affordable coverage is health plans' top priority.  The only reason consumers are getting notices about their current coverage changing is because the ACA requires all policies to cover a broad range of benefits that go beyond what many people choose to purchase today."

So the President called the insurance industry on that, by changing the very rule they were complaining about:

"What we want to do is to be able to say to these folks, you know what, the Affordable Care Act is not going to be the reason why insurers have to cancel your plan."

In other words, it's now up to insurance companies, not the ACA, to decide if people can keep their health plans. If they can't, insurers will take the blame.

"What folks may find is the insurance companies may still come back and say, we want to charge you 20 percent more than we did last year, or we're not going to cover prescription drugs now," the President said.

Speaking for the industry, Ignagni reacted with outrage: 

“Changing the rules after health plans have already met the requirements of the law could destabilize the market and result in higher premiums for consumers.  Premiums have already been set for next year based on an assumption of when consumers will be transitioning to the new marketplace.  If now fewer younger and healthier people choose to purchase coverage in the exchange, premiums will increase and there will be fewer choices for consumers.  Additional steps must be taken to stabilize the marketplace and mitigate the adverse impact on consumers.”  

The threat that premiums will have to increase if younger, healthier people don't balance the risk pool is premature, since no one knows yet who or how many people will enroll in the ACA marketplace.  

Even if Ignagni's fears about a sicker risk pool materialize, a piece of the ACA legislation called the Transitional Reinsurance Program offsets the risks of insurance companies by allowing them to collect payments from the government if the costs of covering the sickest people surpass a certain threshold.

With that, the President's reprieve for cancelled policy owners shouldn't be a cause for increasing healthcare premiums.  

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