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ACA Means Change of Insurance Plans for Individuals, Small Groups

As barebones plans go away, new coverage will be more extensive, expensive

Joel C. Cantor
Credit: Amanda Brown
Joel Cantor, director of the Rutgers Center for State Health Policy.

All individuals and small groups that hold health insurance policies will have to choose a new plan in the coming year, leaving many in the state uncertain about what they'll be paying and what sort of coverage they'll have in the future.

The change in plans comes as a result of the 2010 Affordable Care Act, as well as the decision by New Jersey insurers not to offer policies with the same benefits and cost structures as they did in 2010.

The ACA includes a provision that allows plans that didn’t change after 2010 to be grandfathered in without being affected by most of the new regulations. But New Jersey insurers decided against taking advantage of that provision, saying that residents would have seen price increases even if some plans had been carried over.

In most cases, the new plans are more expensive because they cover more. Some of the coverage that residents had in the past was barebones and thus cheaper. The ACA requires a minimum level of coverage, regardless of the plan chosen. For example, dental and vision care for children is now required for all health plans.

The situation has undermined President Barack Obama’s assertions that Americans who like their health plans would be able to keep them.

Joel Cantor, director of the Rutgers Center for State Health Policy, said the public campaign to support the law always contained a contradiction between two goals: to improve health insurance and to guarantee that people who like their plans would be able to keep them.

“The goal of strengthening health insurance to make sure it’s sufficiently comprehensive and covers people when they really get sick conflicts with the promise that everyone can keep their plans if they like it,” Cantor said, adding, “Certainly complexities didn’t come across. When you simplify it in trying to sell something to the public, in essence (Obama) was stating principles that were in conflict with each other.”

Gov. Chris Christie referred to the apparent gap between the promise and reality while appearing on “CBS This Morning” on Tuesday, noting that many Americans are receiving notices that they will have to change plans.

“The White House needs to square that with what was told to people, and told to the Congress beforehand, and it doesn’t seem to square at the moment, but we’ll wait and see,” Christie said.

Obama scaled back the promise on Wednesday, saying at an appearance in Boston, “for the vast majority of people who have health insurance that works, you can keep it.”

Compared with plans available before the ACA was enacted, the new plans require that insurers pay for a wider range of preventive services and treat mental illnesses the same as other illnesses. They also forbid a person’s sex from being factored into the amount he or she has to pay for insurance.

Horizon Blue Cross Blue Shield of New Jersey and AmeriHealth New Jersey are the only two insurers that currently offer individual and small group insurance that will continue to offer it in January, when many ACA provisions go into effect.

Representatives of both companies said yesterday that they decided against grandfathering plans.

AmeriHealth Senior Vice President Mike Munoz, who oversees sales and marketing, said individuals and small groups would have seen an increase in their insurance costs even if the company had offer a grandfathered plan, because some new federal regulations would still have affected rates.

Munoz indicated that maintaining existing plans would have hindered the company’s focus on reducing the variations on the insurance plans it offers in the small-group market.

“We were going through a portfolio streamlining in an effort to prepare for reform,” Munoz said, noting that the total number of AmeriHealth small-group plans is dropping from 2,200 to 234. Many plans had evolved over time to meet the needs of specific groups of employers, adding to the available plans. Insurers used the requirement to add new benefits under the ACA as an opportunity to simplify the total number of plans.

AmeriHealth members with plans ending before December 15 will be able to renew these plans for a year -- after that, they will have to choose new plans that conform with the ACA. The company sent notices informing members of the change in September and is supplying information about the new options as individual and small-group plans come up for renewal.

Horizon also notified 90,000 individuals in September that their policies would be discontinued and offered assistance in choosing new plans. They could renew their current plan into 2014 or choose a new plan, Horizon spokesman Thomas Vincz wrote in an email.

Most individual Horizon members had barebones health plans that wouldn’t even have met the bar for being “grandfathered,” Vincz wrote. The other plans have many similarities with the new plans.

“Furthermore, maintaining those plans would have resulted in an extensive administrative burden to maintaining multiple portfolios of products, grandfathered vs. non-grandfathered,” Vincz wrote.

Cantor said that in the long run, it would be impossible for residents to have the same insurance they had before 2010, since insurance plans are always changing, regardless of the ACA’s enactment. So any grandfathered plans won’t be around for many years, even in other states where insurers did decide to offer them.

“As a practical matter, the grandfathered plans are going to go away on their own,” Cantor said. “Benefits are not static. They change over time and carriers don’t want plans that aren’t enrolling new people and the people in the plans just get older and older and sicker and sicker.” Cantor added that the ACA put into place important safeguards that will make the plans that residents purchase more valuable.

“People love these barebones plans until they need” treatment, Cantor said. “It’s sort of the nature of the beast that we shop for a low price” and only consider the benefits of having a more expensive plan once an illness requires care.

Cantor does expect the changes to lead to disruption in the small-group market, which many small business owners rely upon.

These business owners face a bewildering situation, according to Christine Stearns, vice president of health and legal affairs for the New Jersey Business & Industry Association. While they know they can’t renew their current plans if they expire after January 1, they don’t know what their new options will cost. Because few employers have completed the process of getting new plans, it’s too early to determine the impact of the ACA on small-group insurance costs.

Some differences are clear, however. The requirement that men and women be treated the same in determining premiums will mean that businesses that employ more younger women or older men will see somewhat lower rates. That’s because insurers will no longer be able to charge more for people based on their sex, as they currently do. Women have higher medical bills when they are younger, due to ob-gyn services. However, as people age, men’s medical bills are higher.

Business owners also have to weigh the effect of the new marketplace on their employees. Some employers with a number of low-income workers may find that most of them would be better off seeking subsidized insurance through the marketplace, while those ineligible for subsidies would be worse off without employer coverage. “The environment in which small employers are obtaining their coverage is changing and they have a lot of decisions to make. Right now, what’s difficult is it’s hard for them to get the information to make those decisions,” Stearns said.

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