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So insurance companies can continue those cancelled policies. Then what?

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When President Obama announced on Thursday that he would honor his promise that "people can stay on their plans if they like them," not all states or insurance companies were thrilled. Florida's insurance regulator Kevin M. McCarty  put his support behind the health policy extensions.

"We have been working with our carriers for the past several months on this, and with our largest carrier over the past couple of days, as far as rescinding the policy cancellations, McCarty said. Florida Blue, which dominates Florida's individual health insurance market, sent out 300,000 cancellation notices to health policy holders in October.  McCarty said most carriers have voluntarily extended coverage to their customers by offering early renewal. 

But not all insurance commissioners were as sanguine as he was about the President's policy change.In a prepared statement, Washington insurance commissioner Mike Kreidler  said:

 "I do not believe his proposal is a good deal for the state of Washington. In the interest of keeping the consumer protections we have enacted and ensuring that we keep health insurance costs down for all consumers, we are staying the course. We will not be allowing insurance companies to extend their policies. I believe this is in the best interest of the health insurance market in Washington."

Almost as many Washington residents -- about 290,000 -- had their plans cancelled as in Florida.  What's behind these different reactions?

Insurance companies in every state have been working for three years to design new plans that comply with the healthcare law while sustaining their profit margins. The ACA allowed them the option to grandfather their health plans so customers could stay on them, but in most cases, it wasn't good business for them to do so.

The launch of Healthcare.gov would have been the perfect time to transition their customer bases to the new health plans, except for two things. First, insurance companies sent out cancellation notices offering to move customers to plans that were more expensive. Then, while the letters blamed health reform for the higher costs, in most cases they didn't mention more affordable options -- and consumers couldn't easily shop for them because their federal exchange, Healthcare.gov, was broken.

"Every state has a different nuance," said McCarty. "Washington state has planned their exchange for quite some time and was ready to transition."

There may be logic to making the transition all at once, as Washington is doing. The state's exchange offers 46 individual health plans, with 51 more available outside the exchange.   

Beyond the initial scream factor, states that move to ACA-compliant plans may have broader risk pools, creating a more stable and sustainable healthcare platform for insurance companies and consumers alike. 

That was Kriedler's view, despite the scream factor from his state's cancelled policy holders.  "I have serious concerns about how President Obama's proposal would be implemented and more significantly, its potential impact on the overall stability of our health insurance market." he said. 

"The [President's] change will affect the distribution. That's the concern the carriers have, as well as the difficulty in a short time to put their policies back," McCarty said.

The concern is that the healthiest people will decide to keep their old policies, while the sicker people -- those who insurers refused in the past to cover -- will flood the health exchanges, creating an imbalanced pool. As states respond differently to the policy extension option, the rollout of the Affordable Care Act is likely to increase healthcare variations across the country. 

 

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