Obama Gives One-Year Reprieve for Canceled Policies

Photographer: Win McNamee/Getty Images

The administration will send a letter today instructing state insurance commissioners to notify insurers that they can continue the sale of canceled policies for an additional year, according to White House officials. Close

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Photographer: Win McNamee/Getty Images

The administration will send a letter today instructing state insurance commissioners to notify insurers that they can continue the sale of canceled policies for an additional year, according to White House officials.

President Barack Obama offered a one-year reprieve to Americans facing cancellation of their health-care policies, a change that the insurance industry warned may lead to higher premiums.

Obama acknowledged that his administration’s credibility was damaged by the “fumbled” rollout of the federal website for buying insurance and the cancellations of hundreds of thousands of individual policies after he repeatedly said that those who like their insurance could keep it.

“I completely get how upsetting this can be for a lot of Americans, particularly after they heard assurances from me,” Obama said at a White House news conference. “This fix won’t solve every problem for every person, but it’s going to help a lot of people.”

Obama is seeking to quell a potential revolt by Democrats facing re-election next year who have been urging the president to offer a plan before a House vote tomorrow on a Republican proposal to let insurers continue selling policies that don’t meet the law’s requirements.

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Obama’s plan may not halt attempts by Democrats to pass legislation and it drew warnings from the insurance industry.

Insurance Premiums

Karen Ignagni, president and chief executive officer of America’s Health Insurance Plans, an industry trade group, warned that Obama’s action “could destabilize the market and result in higher premiums for consumers” and hinted the industry would seek unspecified assistance.

“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,” Ignagni said in an e-mailed statement. “Additional steps must be taken to stabilize the marketplace and mitigate the adverse impact on consumers.”

She said premiums already have been set for next year based on expectations about when consumers would be buying through the marketplaces set up under the law.

The change “puts the insurance companies, who have successfully complied with the law, in a hell of a mess,” said Robert Laszewski, an Alexandria, Virginia-based consultant to the industry.

Short Notice

How Do the Health Care Exchanges Fit In?

Carriers will have to notify policyholders and reprogram computer systems before the Dec. 15 deadline for people to find coverage that starts Jan. 1, he said by e-mail. Any company that can’t, or won’t, accomplish the task will be stuck with “the blame” for cancellations now, he said.

Democratic Senator Mary Landrieu of Louisiana, who is facing re-election next year in a state that Obama lost by 17 percentage points in 2012, said she planned to continue working on legislation to ensure state insurance officials act.

“The president’s announcement was a great first step and we will probably need legislation to make it stick,” said Landrieu, who who has five co-sponsors on her bill to let people keep their current policies.

“My legislation is intended to keep the promise. Period, big stop. And as soon as we can do that the better,” she said. “The president’s is guidance, it’s not mandatory.”

Obama’s chief of staff, Denis McDonough, was set to meet today with Senate Democrats.

State Matter

White House officials said state insurance commissioners will be sent letters today instructing them to notify insurers that they can continue the sale of canceled policies for an additional year.

The extension will be available only to those already enrolled in the policies that were canceled because they didn’t meet coverage standards under the health-care law. The extended policies won’t qualify for subsidies. The change will be effective for one year, until the end of 2014.

Insurance companies that extend their policies must notify consumers that alternatives exist under the health-care law, including options that may include tax credits, and are required to describe the ways that their plans don’t meet the consumer protections required under the law.

The new policy leaves it to the discretion of insurers and state insurance regulators whether to extend the policies.

Insurance Transition

Obama’s extension affects only a small slice of Americans, who typically use these plans for less than a year as a stopgap policy between jobs. It’s aimed at smoothing the transition into the new insurance system established by the law, according to White House officials, who asked for anonymity to describe the policy before the president’s remarks.

A notice in the Federal Register in 2010 estimated that as many as 67 percent of people who buy individual policies leave their plans every year.

The Republican legislation would let insurers continue selling for a year current policies that don’t meet the Patient Protection and Affordable Care Act’s requirements to new customers, which White House officials said would undermine a central principle of the health law.

House Speaker John Boehner, an Ohio Republican, said he is “highly skeptical” that the system can be modified through administrative measures.

“It appears this is little more than a political response designed to shift blame rather than solve the problem,” Boehner said in a statement after the president’s announcement.

Standing Firm

Obama said he would defy Republican attempts to scuttle the law, known as Obamacare.

“I will not accept proposals that are just another brazen attempt to undermine or repeal the overall law and drag us back into a broken system,” he said. “I’m not going to walk away from something that has helped the cost of health care grow at its slowest rate in 50 years.”

The debut of the insurance marketplace, the core of the law that is Obama’s signature achievement, has been marred by flaws in the federal online exchange and by the insurance cancellation letters. In the debate over the law, Obama had repeatedly promised that Americans who liked their existing insurance plans would be able to keep them.

Obama said he was “not informed directly” about how deeply flawed the website was in the weeks and days before its rollout on Oct. 1. He again apologized for assuring the public that they would see little change when the law took effect.

“There is no doubt that the way I put that forward unequivocally ended up not being accurate,” Obama said. A so-called grandfather clause that allowed policies in place before the law was enacted in 2010 was “insufficient,” he said.

“My expectation was that for 98 percent of the American people either it genuinely wouldn’t change at all or they’d be pleasantly surprised with the options in the marketplace” and the grandfather clause would cover the rest, he said, and that turned out not to be the case.

Obama also said he couldn’t guarantee that the website technical difficulties would be completely resolved by the end of the month.

“It will be a lot better but there will still be some problems,” he said.

To contact the reporters on this story: Roger Runningen in Washington at rrunningen@bloomberg.net; Alex Wayne in Washington at awayne3@bloomberg.net

To contact the editor responsible for this story: Steven Komarow at skomarow1@bloomberg.net

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