Policy disagreements between health plan regulators and state health benefit exchanges are complicating the launch of the marketplaces in some states. California’s exchange, Covered California, acted earlier this year to close a loophole discussed here that has the potential for generating adverse selection in the state’s individual market risk pool and consequently driving up premium rates for plan year 2015 and later years.
Covered California’s contract with its participating plans requires plan issuers to agree to play under plan year 2014 rules that require a single statewide risk pool. The exchange wants to avoid a split risk pool: one operating under the 2014 rules that require plans to accept all applicants for coverage having less healthy people and another operating under pre-reform rules able to exclude these individuals. That would set up a scenario where the single statewide 2014 pool would contain a disproportionate number of people who would generate higher medical costs. The loss “experience” of that pool as it’s called in the insurance business would lead to a higher baseline index for plans effective in 2015 and later years, likely leading to higher premiums. “Covered California has always been guided by the vision of starting 2014 with a level playing field and a single risk pool, which allows Californians to get better benefits in a more stable market,” Covered California Executive Director Peter Lee told The Los Angeles Times.
Covered California’s policy prompted health plans participating in the exchange — which includes the state’s major plan issuers — to notify current policyholders their current policies are being cancelled effective January 1, 2014. California Insurance Commissioner Dave Jones however maintains California law requires at least six month’s notice of cancellation and pressed one plan issuer, Blue Shield of California, to reluctantly allow its members to keep their 2013 coverage through March 31, 2014.
California HealthLine provides some context behind this development:
According to Jones, the move came after Blue Shield took advantage of a “loophole” in state law that allowed them to submit their plans to a regulator who oversees managed care plans. However, that shift required the insurer to give policyholders a 180-day notice of cancellation, and Blue Shield only provided a 90-day notice.
Need a speaker or webinar presenter on the Affordable Care Act and the outlook for health care reform? Contact Pilot Healthcare Strategies Principal Fred Pilot by email