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Obama Gives One-Year Reprieve for Canceled Policies

U.S. President Barack Obama
U.S. President Barack Obama speaks to workers at ArcelorMittal in Cleveland on Nov. 14, 2013. Photographer: Michael Francis McElroy/Getty Images

President Barack Obama gave a potential one-year reprieve to Americans facing cancellation of their health plans as the insurance industry warned the action may lead to higher premiums.

The president offered an extended apology along with the announcement, acknowledging that his 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.

Obama’s plan may not halt attempts by Democrats to pass legislation as sponsors of a Democratic measure in the Senate said they would continue to press for its adoption.

State Discretion

Nor is it clear how many of the policyholders who received cancellation notices will have the option to continue coverage. The new policy leaves it to the discretion of insurers and state insurance regulators whether to extend existing health plans purchased on the individual market through next year.

Washington state insurance commissioner Mike Kreidler announced just hours after Obama spoke that he would not allow the extension of such policies in his state.

The insurance industry warned that Obama’s action may drive up costs for policies issued through the new insurance marketplaces that are the cornerstone of the 2010 health law.

The health-care law mandates an end to discrimination against people with pre-existing health conditions and requires all policies to meet minimum coverage standards in return for a legal obligation that all Americans obtain insurance enforced by a fine for non-compliance. That balance could be upset if people with fewer health problems disproportionately opt to retain existing plans.

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.”

Insurance Premiums

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, Ignagni said in an e-mailed statement.

She suggested the industry may seek unspecified assistance. “Additional steps must be taken to stabilize the marketplace and mitigate the adverse impact on consumers,” she said.

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.

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.

Landrieu Measure

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 that 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 has five co-sponsors, all Democrats, 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.”

Senate Majority Leader Harry Reid, a Nevada Democrat said Obama’s announcement “is an important step toward addressing a problem that has arisen and if we need to do more, we will.”

Obama’s chief of staff, Denis McDonough, met today with Senate Democrats.

Republican Plan

The Republican legislation in the House 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.

Representative Steve Cohen, a Tennessee Democrat, said that no more than 20 to 25 of the 200 Democrats in the House would vote for the Republican plan because the “administration has taken some action” and has “turned a corner” in accepting responsibility.

House Speaker John Boehner, an Ohio Republican, said he is “highly skeptical” of Obama’s solution.

“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.

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.

One-Year Extension

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, such as options that may include tax credits, and are required to describe the ways that their plans don’t meet the required consumer protections.

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.

Defending Law

Obama said today 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 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.

‘Grandfather Clause’

“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.”

“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’s 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.

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