Obama gives substandard health plans another reprieve

Kentucky health care exchange navigator Courtney Lively waits for enrollees to show up, November 20, 2013.
Kentucky health care exchange navigator Courtney Lively waits for enrollees to show up, November 20, 2013.

Like your plan, keep your plan—at least for two more years.

By putting out that message Wednesday, the Obama administration extended the treaty it reached last fall with the half-million consumers who were set to lose their low-cost, low-value insurance plans under the Affordable Care Act.

In new guidance documents, the administration said that insurance companies could keep offering substandard individual health plans through 2016, but only to people who already had them when the health care law took full effect this year.

The law identifies 10 essential health benefits—ranging from maternity care to lab tests and prescription drugs—that all plans had to cover as of January 1, 2014. Policies sold on the individual market before March 23, 2010, were exempt from the new standards, but when consumers with non-grandfathered plans started getting cancellation notices last fall, many were outraged.

Most would have found better coverage at better rates through the new health insurance exchanges, but those who liked their low-value plans accused the president of lying to them, and their grievances sparked an insurrection in Congress.

Under pressure from fellow Democrats, the president quickly exempted the old health plans from the new law. Through an administrative rule, he allowed insurers to renew substandard policies (but not sell new ones) if state regulators would allow it. The loophole was set to expire in a year unless the administration decided to extend it.

Wednesday’s new rule does just that. “Taking account the experience to date,” the administration said in a fact sheet, “HHS extended this transition policy for two years, to policy years beginning on or before October 1, 2016, giving states and issuers the option of allowing consumers to renew 2013 plans for two more years.”

The exemption contradicts the whole spirit of the health care law, and it was never popular with insurers or state regulators. Insurers were ill-prepared to revive the expiring plans when the president handed them his problem last fall. And half of the nation’s insurance commissioners refused to reauthorize the old plans, fearing they would undermine the new health insurance exchanges.

But politically, the president has little choice but to reopen the loophole. Without the extension, many of the cancellations he managed to postpone last fall would have set in just before this year’s midterm elections. “I don’t see how [the White House] could have a bunch of these announcements going out in September,” an industry source told The Hill. “Not when they’re trying to defend the Senate and keep their losses at a minimum in the House.”

In a Wednesday conference call with reporters, administration officials denied that the extension was a political gesture. “As we looked at the experience this year with the transitional policy, we determined that the number of people in transitional plans was falling rapidly,” one official said, speaking on background. “But a number of people are still enrolled [in the old plans]. We wanted to give them the option of continuing the overage they had while requiring that issuers notify them of the marketplace option.”

The junk plans will die off over time. Meanwhile, the administration is adjusting other policies to make sure the health insurance exchanges don’t suffer as potential customers opt for lesser coverage. If all goes as planned, the “keep your plan” debacle won’t even resurface as a political issue this fall. Unfortunately, it’s still dictating health care policy.