Photo (cc) by jasleen_kaur
This post comes from Susan Ladika at partner site Insurance.com.
It all started with a letter. Then the email and the endless phone calls began.
I’m self-employed and purchase my own health insurance, and two months before the state health exchanges were up and running as part of health care reform, my insurer, Humana, was hounding me to decide whether to keep my existing policy or switch to a new one.
If that wasn’t enough, the letter told me I had until early September to make up my mind.
Sorry. I’m a Libra. I weigh all my options before making a decision. The health exchanges don’t even start operation till Oct. 1, so how can I determine my best choice, before I even know what all the choices are?
My strategy was to ignore the letter.
Then I talked to a friend who is also self-insured through Humana, and she was rushing to re-enroll, fearing her existing policy would be canceled and she’d be left without coverage if she didn’t re-up before the September cutoff date.
I started investigating the situation, and apparently Humana is far from alone.
Industry experts at the Center on Health Insurance Reforms at the Georgetown University Health Policy Institute wrote a blog item about this very topic.
A number of insurers, which the blog doesn’t name, have been pushing existing customers to renew their policies before Jan. 1. Some states have responded by prohibiting or limiting early renewals.
And complaints by customers in Kentucky have prompted that state’s Department of Insurance to investigate Humana and Anthem Blue Cross Blue Shield for sending out letters to try to lock in customers early.
“What they’re trying to do is keep you in their plan and keep you from shopping on the exchange,” says Sally McCarty, senior research fellow at the institute and former insurance commissioner for the state of Indiana.
Lynn Blewett, a professor in the Division of Health Policy Management at the University of Minnesota, says, “Even if it isn’t against state law, it’s sort of against the spirit of the Affordable Care Act.”
So what should you know if your current insurer contacts you, pushing you to renew your existing policy?
What happens if I keep my current policy?
In my case, I could keep my existing policy — which doesn’t have the same benefits as those that will be sold on the state exchanges starting next month. Policies sold on the exchanges will take effect Jan. 1.
The online exchanges, sometimes called health insurance marketplaces, let you compare and review similar plans and costs, apply for discounts in the form of tax credits and purchase coverage. There were three options under health reform for states to choose how they will run their marketplaces. Each state could develop its own, join the federally run exchange or take part in a joint federal-state health insurance exchange.
Existing policies don’t have to cover the 10 essential health benefits, such as outpatient care, emergency services and preventive care, required under the Patient Protection and Affordable Care Act. Any riders and limitations with my current policy remain in place.
If I keep my existing policy, it would provide coverage until Dec. 31, 2014.
The letter I received contains an estimate of future premiums, but makes it clear the actual costs might vary because new policy premiums must be approved by my state’s insurance department.
Based on estimates, my existing policy would cost about 60 percent of the cost of an ACA-compliant plan.
In an emailed response to questions for this article, a Humana spokesperson wrote, “If a member selects one option and changes his/her mind, then all he/she needs to do is contact us no later than Dec. 31 to make any necessary updates and changes.”
That means that even though I didn’t opt for my existing plan by early September, I would still have till the end of the year to decide to keep it.
What if I don’t renew? Will I lose my health insurance coverage?
While it isn’t directly stated, McCarty says because the letter doesn’t contain a termination date, my current policy continues in effect through the end of the year.
It does not end because I didn’t renew by early September.
The letter states that by not responding within 30 days, I’ll be switched to an ACA-compliant plan as of Jan. 1.
There is no mention of having the ability to shop on the exchange.
Are there other limitations?
The letter also doesn’t mention that many people will be eligible for federal subsidies to help offset their costs.
People who earn up to 400 percent of the federal poverty level — that’s $94,200 for a family of four in 2013 — will be eligible for premium subsidies in the form of tax credits. People who earn up to 250 percent of the federal poverty level will be eligible for lower deductibles and co-payments.
Plans that aren’t purchased through the exchanges aren’t eligible for subsidies, McCarty says.
If you qualify for a subsidy, you may wind up paying less for your premiums than those offered by your current insurer for its current policy, she says.
The letter also doesn’t mention that exchanges will have four plan levels — platinum, gold, silver and bronze — and that the plan you choose determines your monthly premiums and out-of-pocket costs. With a platinum plan, you’ll pay 10 percent of your health care costs, and your insurer will pay the rest. With a bronze plan, you’ll pay 40 percent and your insurer will pay 60 percent. Because they cover more of your health care costs, platinum plans will have higher premiums than other plans.
How should I decide whether to renew now or wait for exchanges to open?
McCarty recommends waiting till the exchanges are up and running to make a decision, so you see your full range of options.
Existing policies may have co-payment requirements for things such as mammograms and annual physicals, while policies sold on the exchanges won’t require cost-sharing for preventive care.
Existing policies also may have no limits on out-of-pocket expenses, she says.
Why are health insurance companies doing this?
While Humana didn’t answer why they’re pushing to lock customers into their existing policies now, Blewett assumes insurers are targeting healthy customers with these letters. “You’re probably in the low-risk profile so they want to keep you,” she says.”They’re probably not sent to people with a lot of chronic conditions.”
By keeping younger or healthier consumers, “it skews the markets for 2014,” says Timothy Jost, a law professor at Washington and Lee University. Sending less healthy people to the exchanges will make coverage more expensive for everyone on the exchange.
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