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Insurers Face Tough Decisions on Whether to Extend Health Plans

Lawsuits could be filed by patients left without coverage guaranteed by ACA

Kenneth Kobylowski and Neil Sullivan

New Jersey insurers weighing whether to extend health plans scheduled to expire next year face a tight timeframe and serious logistical hurdles in making those decisions.

In addition, the consequences of continuing those plans are unclear. The insurers could face legal action from patients who would not receive protections guaranteed by plans that comply with the federal Affordable Care Act.

These were among the issues addressed during a legislative hearing held yesterday in Trenton on a recent state decision to allow insurers to decide whether to extend expiring health plans.

Wardell Sanders, president and CEO of the New Jersey Association of Health Plans, said at the Senate Commerce Committee hearing that insurance carriers are still taking a “good, hard look” at whether it’s possible to continue to offer the expiring plans.

“For the carriers deciding this, there are enormous operational challenges,” Sanders added.

The dilemma facing insurers arose from the firestorm of criticism that President Obama received when people began receiving insurance-cancellation notices earlier this fall.

The president has repeatedly promised that people who liked their current insurance would be able to keep it. But insurers weren’t required by the law to do this and proceeded to cancel some individual plans, citing both the mandate that policies comply with certain provisions of the 2010 Affordable Care Act and the logistical problems of maintaining separate sets of plans that did and did not comply with the ACA.

In response, Obama asked state insurance commissioners to extend the expiring plans for a year and also provided those plans with temporary relief from many ACA regulations.

Sanders noted that insurers have just spent three years gearing up to offer a new set of health plans that comply with the ACA.

The major provisions of the law go into effect on January 1, 2014, including the start of coverage for people and small businesses who bought insurance through the federal marketplace, or exchange, as well as for people who are newly insured under expanded Medicaid eligibility.

Insurers normally take many months to file new insurance premium rates, receive regulatory approval from the state, and offer the new plans to consumers.

State Banking and Insurance Commissioner Kenneth Kobylowski informed insurers on November 26 that New Jersey would allow them to extend the plans, but federal officials are requiring people who need to buy new insurance to do so by December 23 for it to start on January 1.

“This is all unanticipated,” Sanders said.

Sanders also said insurers are weighing whether it makes sense to go through “this extraordinarily and quick lift” to extend the existing plans, considering that only some consumers would benefit.

Seton Hall University health law professor John V. Jacobi raised a separate point – the possibility of legal challenges over coverage being denied in plans that are extended but don’t comply with the ACA.

Jacobi put forward the hypothetical example of a child of a worker at a small business that offers an insurance plan that is extended but would otherwise have been cancelled because it didn’t comply with the ACA. Jacobi said that if that child were to become sick and be denied coverage that would be mandated by the ACA, the child’s family would be in a strong position to challenge that denial.

For example, pediatric dental care and treatment for some mental illnesses aren’t covered by current health plans, but must be covered under ACA-compliant plans.

“While the employer and maybe even the employee may have agreed to this lesser coverage, the statute still requires that those services be covered,” Jacobi said.

Rutgers Center for State Health Policy Director Joel Cantor said that whether small businesses want to keep their current health plans could depend on the age and sex profile of their employees.

For example, the ACA prohibits charging men and women different premiums. That means a company made of employees who are mostly younger men or older women -- who tend to have lower health bills than the opposite sex at the same age -- would tend to benefit from keeping their current plans.

Employers are primarily concerned with the cost of their health coverage, according to Christine Stearns, vice president of legal and health affairs for the New Jersey Business & Industry Association. But some are also concerned that they can’t plan on their insurance costs because of the lingering uncertainty over whether current plans will be extended.

“There is a great deal of frustration with the instability that this brings,” Stearns said. “Typically employers like to plan for the future.”

Committee Chairwoman Nia H. Gill (D-Essex and Passaic) said all of the uncertainty strengthens the case for the state taking an active role in informing the public about their insurance options.

New Jersey Policy Perspective had raised this point in a report issued earlier in the week.

Gill also called on the state to use $7.6 million in federal funding for this purpose.

Kobylowski, who testified at the hearing, called for a more limited state role, saying that the Department of Banking and Insurance provides customer service support to direct people to insurance options, and also provides information on its website.

He noted that the state is in talks with federal officials about the funding, but he didn’t specify how the state wants to spend it.

The state received the money after applying for it to help build a state-run insurance exchange. Gov. Chris Christie later opted for the federal marketplace.

Sen. Gerald Cardinale (R-Bergen and Passaic) attacked Obama’s handling of the cancelled plans, as well as the new regulations under the ACA. He said individuals will be required to pay for coverage that they won’t use, giving the example of a single man now being required to buy a plan that covers pediatric dental care.

“The feds want us to cover things that don’t exist,” Cardinale said. “If there is no child, there is not a possibility of achieving a benefit.”

Gill promised a more wide-ranging discussion of the ACA during hearings conducted by a new legislative task force that she sponsored.

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