WASHINGTON - Warding off the specter of election-year health-insurance cancellations, President Barack Obama’s administration announced Wednesday a two-year extension for individual policies that don’t meet requirements of the new health-care law.
The decision helps defuse a political problem for Democrats in tough re-election battles this fall, especially for senators who in 2010 stood with Obama and voted to pass the health overhaul.
The extension was part of a package of regulations that sets ground rules for 2015, the second year of government-subsidized health insurance markets under Obama’s law - and the first year employers with 50 or more employees will face a requirement to provide coverage.
Hundreds of pages of provisions affecting insurers, employers and consumers were issued by the Treasury Department and the Department of Health and Human Services. It will likely take days for lawyers and consultants to fully assess the implications.
The new health-care law sets dozens of federal standards for health insurance, requiring coverage of services in 10 specific areas and providing many consumer protections not found in older insurance policies. Starting last fall insurers canceled many policies for individuals and small businesses because they did not meet the law’s minimum coverage requirements.
The cancellation last fall of at least 4.7 million noncompliant policies hit around the time that the healthcare.gov website was overwhelmed with technical problems that kept many consumers from signing up for coverage. It contradicted Obama’s promise that people could keep their existing insurance plans.
In November, the Centers for Medicare and Medicaid Services gave state insurance commissioners the option of allowing people to stay in such plans for an additional nine months..
Under the transition policy, insurers “may choose to continue coverage that would otherwise be terminated or canceled.” Insurers were allowed to renew existing policies even if they did not provide the “essential health benefits” prescribed by law.
About half the states allowed insurance companies to extend canceled policies under the original White House reprieve. The policies usually provided less financial protection and narrower benefits than the coverage required under the law. Nonetheless, the skimpier insurance was acceptable to many consumers because it generally cost less.
The latest extension would be valid for noncompliant policies issued up to Oct. 1, 2016.
Arkansas Insurance Commissioner Jay Bradford said he was reviewing Wednesday’s announcement, but would likely exercise the option to allow Arkansans to stay in the noncompliant plans.
As of November, about 70,000 people in the state were in the noncompliant plans, Bradford said at that time. He said he didn’t have an updated figure Wednesday, but estimated it is in the tens of thousands.
The state’s current policy allows most Arkansans who are in the noncompliant plans to stay in them until the end of this year.
When the first extension was announced, Bradford said he didn’t plan to allow Arkansas policies to be extended for the additional time because he didn’t want to confuse consumers.
On Wednesday, however, Bradford said, “The momentum across this nation is to let people continue the policy they have if they so desire. So, in keeping with that philosophical position, I think probably more time is appropriate.”
He added that people in the noncompliant plans should study their options. In some cases, they may be able to find better coverage in a plan that does meet the health law’s requirements, he said.
“It could certainly be to their advantage to make a move now,” Bradford said.
In addition to those who are in the noncompliant plans, more than 50,000 Arkansans as of November were in plans that are considered grandfathered because they were issued before March 23, 2010, when Obama signed the health-care overhaul law. The law allows those plans to continue indefinitely.
A spokesman for Arkansas Blue Cross and Blue Shield, the state’s largest insurer, said more than 35,500 people were in plans as of Wednesday that were issued before the Patient Protection and Affordable Care Act requirements took effect on Jan. 1 but after the law was signed in March 2010.
OTHER HIGHLIGHTS
In addition to the policy extension, other highlights of the regulations announced Wednesday include:
An extra month for the 2015 open-enrollment season. It will still start Nov. 15, as originally scheduled, after the congressional midterm elections. But it will extend for an additional month, through Feb. 15 of next year. The administration said the schedule change gives insurers, states and federal agencies more time to prepare. The current open-enrollment period started Oct. 1 and ends March 31.
New maximum out-of-pocket cost levels for 2015. Annual deductibles and co-payments for plans sold on the insurance exchanges can’t exceed $6,600 for individuals or $13,200 for families. While not as high as what some insurance plans charged before the law, cost sharing remains a stretch for many.
An update on an unpopular per-member fee paid by most major employer health plans. The assessment for 2015 will be $44 per enrollee, according to the regulations. Revenue from the fee goes to help insurers cushion the cost of covering people with serious medical problems. Under the law, insurance companies can no longer turn the sick away.
The per-person fee has been criticized by major employers. It is $63 per enrollee this year, and is scheduled to phase out after 2016. Some plans, including multiemployer arrangements administered by labor unions, will be exempt from fees in 2015 and 2016.
Treasury Department rules for employers and insurers to report information that’s crucial for enforcing the law’s requirements that individuals carry health insurance, and that medium-to-large employers offer coverage. Although officials said the reporting requirements have been streamlined, businesses see them as some of the most complicated regulations to result from the health-care law.
The Internal Revenue Service will collect the information, because it is in charge of dispensing tax credits for individuals and small businesses to buy coverage as well as levying fines on those who fail to comply. The individual mandate is already in effect. The employer requirement begins to phase in next year after it was delayed.
Notice of a potential delay, optional for states, in a promised feature of new health-insurance markets for small businesses. The feature would allow individual employees - not the business owner - to pick coverage from a list of plans. The health-insurance exchanges for small businesses have been troubled by technical problems this year.
It’s not clear how many people will actually be affected by the most closely watched provision of the new regulations, the two-year extension on policies that were previously subject to cancellation. The administration cited a congressional estimate of 1.5 million people, counting those in individual plans and small-business policies.
The National Association of Insurance Commissioners, which represents state regulators, was skeptical of the change.
“Creating two tiers of plans - the compliant and noncompliant - could result in higher premiums overall and market disruptions in 2015 and beyond,” said association president Adam Hamm, who is North Dakota’s insurance commissioner. Hamm is a Republican, but the association is nonpartisan.
Jonathan Turley, a law professor at George Washington University, said Obama was setting precedents that could be used by future presidents to delay other parts of the healthcare law - or to suspend laws dealing with taxes, civil rights or protection of the environment.
“Democrats will rue the day if they remain silent in the face of this shift of power to the executive branch,” Turley said.
Republicans said they were not surprised by the president’s latest move. Indeed, they said it confirmed their contention that parts of the health-care law were unpopular and unworkable.
“Clearly, the president admits that Obamacare has failed by trying to hide its full effects from voters until he is safely out of office,” said Rory Cooper, a spokesman for Rep. Eric Cantor of Virginia, the House majority leader. “They won’t be fooled.”
Republican members of Congress said they have received letters from thousands of constituents complaining about the cancellation of insurance they liked.
Obama and many Democrats in Congress say consumers should not be alarmed by cancellation notices because, in many cases, they can get better coverage at a lower price on an insurance exchange, especially if they qualify for subsidies.
But consumers said they have found that many of the new policies have high deductibles and limit the choice of doctors and hospitals.
PENALTY-DELAY PUSH
Separately, the House on Wednesday voted to delay for one year the penalty faced by individuals under the law if they fail to sign up for health insurance. It was the 50th time Republicans have forced a vote to repeal, gut or change the health-care overhaul.
The vote was 250-160, with 27 Democrats joining Republicans on legislation to postpone the individual mandate under the law. The measure stands no chance in the Democratic-led Senate and the White House has threatened a veto.
Three of Arkansas’ Republican representatives - Tim Griffin, Steve Womack and Tom Cotton - voted in favor of the delay. Rep. Rick Crawford, also a Republican, did not vote.
Some vulnerable Democrats in competitive races voted with the GOP, including lawmakers from Arizona, Georgia, Illinois and New Hampshire. Democratic Rep. Gary Peters, who is seeking Michigan’s open Senate seat, backed the bill.
The 4-year-old health law requires U.S. citizens and legal residents to have qualifying health-care coverage or face a tax penalty based on household income. The penalty will be phased in at 1 percent of taxable income this year, 2 percent in 2015 and 2.5 percent in 2016.
During the House debate, Republicans argued that the breaks Obama has provided to businesses facing penalties under the law should apply to average Americans.
“If the president can delay the employer mandate, where’s the relief for everyone else?” asked Rep. Lynn Jenkins, R-Kan.
Democrats said the GOP hasn’t come up with a viable alternative that would expand coverage and deal with egregious insurance practices.
They questioned why the House was holding another health-care vote while no action has been taken on raising the minimum wage, overhauling immigration and extending unemployment insurance.
“Don’t we have anything else to do?” asked Rep. Henry Waxman, D-Calif.
Information for this article was contributed by Ricardo Alonso-Zaldivar and Donna Cassata of The Associated Press; by Robert Pear of The New York Times; and by Andy Davis of the Arkansas Democrat-Gazette.
Front Section, Pages 1 on 03/06/2014