Bowing to political pressure and growing criticism about the policy cancellation letters millions of Americans with individual health insurance coverage are receiving from their insurance companies, President Obama announced today that those individuals will be able to hang on to their coverage for another year.
The President’s plan does not allow insurance companies to sell non-compliant plans in 2014, it just allows them to renew current plans, even if they weren’t effect on March 23, 2010, the date the law was signed, and therefore are not grandfathered.
The administrative fix also doesn’t require insurance companies to allow people to renew – in the same way that an insurer had the option back in 2010 of moving everyone to the new plan designs with no ability to stay grandfathered, the current proposal would allow insurance companies to decide whether or not to allow people with existing coverage to renew their plan in 2014.
Some carriers have actually been working on a short-term fix for a while, automatically renewing all of their individual policies early – December 1, 2013 – so that members would not be required to move to a new, compliant plan until December 1, 2014. It is unclear at this point how long someone who renews in 2014 could keep their current coverage – until the end of the year or until their next renewal date. The best-case scenario for many of these individuals would be that they could renew their current, non-compliant plan on December 1, 2014 and would not have to move to the new plan design until December 1, 2015, nearly two years after the new rules go into effect.
One other important point is that anyone who does choose to renew their existing, non-compliant coverage (if they’re given that option by their insurance company) would be ineligible for a premium tax credit in 2014. Since a significant percentage of people who currently have coverage in the individual market would qualify for a tax credit if they purchased a new plan through the federal or state exchange (or through a private exchange site), many people may eventually decide that they are, in fact, willing to exchange their current coverage for a new, ACA-compliant plan in 2014.