By Jackson Adams Illinois News Network
November 24, 2013
The Illinois Department of Insurance has reversed its position on whether it would allow pre-Obamacare insurance plans to renew in 2014.
The Department of Insurance confirmed it will “follow President Obama’s Nov. 14 recommendation and allow insurance companies to renew a number of health plans in the individual and small group markets that do not meet certain Affordable Care Act requirements without being penalized.”
The agency also confirmed that about 185,340 Illinoisans with individual plans had their insurance canceled or terminated so far in 2013. Individual plans make up a tiny fraction of the total insurance market, which is dominated by group plans.
“DOI came to this decision based on the concerns raised by Illinois consumers and the guidance from the U.S. Department of Health and Human Services,” said Andrew Boron, director of the Illinois Department of Insurance. “Allowing companies to renew current plans gives consumers more time to evaluate their options and will provide a smoother transition into the health care coverage system envisioned by the ACA.”
But in a bulletin to insurance companies released earlier this year, Boron explicitly prohibited the renewal of plans.
“It has come to the attention of the department that insurers may try to avoid the Jan. 1, 2014 deadline and delay compliance with the reforms for almost a year,” Boron said in the April bulletin. “The department will not approve policy form filings providing for such arrangements.”
The bulletin went on to explain that arbitrarily establishing new insurance plan years – referring to the duration of an insurance policy — are in contravention of federal rules and regulations and “violates the spirit and intent of the law that the market reforms be administered in a consistent and timely manner.”
The Department of Insurance declined to comment on the change in position.
Even before the announcement, many insurers were already allowing their group plans to renew early.
“A lot of the insurance carriers have offered what they call ‘early renewals’ and some offer them down to Dec. 29, despite the ruling by the state department of insurance,” said George Duczak, past president of the Chicago and Northeastern Illinois Association of Health Underwriters. “It had been almost totally ignored by the insurance industry. They claim the state had no regulatory authority to do that.”
Duczak explained why early renewal was so attractive to insurers and consumers alike.
“A lot of companies are taking advantage of early renewal, which abnegates the requirement that they have to comply with all the new benefit, underwriting constraints, all the perceived enhancements of the ACA, which come with a pretty significant price tag,” he said.
Now that early renewals have DOI’s blessing, insurers are doing what they can to allow consumers to get covered outside of the Affordable Care Act exchanges. But that doesn’t mean those who lost their insurance will automatically get it back.
“We are reviewing the announcement from the Illinois Department of Insurance and will determine next steps as we keep our members informed of their options both on and off the exchange,” said Mary Ann Schultz, a spokeswoman for Blue Cross Blue Shield Illinois. “We will continue to support solutions that work towards no disruptions in health insurance for our existing members. We will reach out to consumers who may have new options as a result of the Illinois Department of Insurance’s announcement.”
The announcement was warmly received by some Illinois lawmakers.
“I think our insurance department is acting appropriately,” said state Rep. Monique Davis, D-Chicago. “People are just getting an understanding of the marketplace. I don’t think it will iron itself out overnight because it’s such a massive and positive change. We’ve got enough drama going on about this. We’re so much about what’s wrong that we’re not getting the information out about what’s right.”
Allowing people to keep their insurance may have a negative impact on premium rates in the new health exchanges if the young and healthy do not enroll in the exchanges, leaving that insurance pool composed mainly of the old and sick. This situation is known as a “death spiral.”
“The enrollment and risk pools vary state to state. One state might be successful in signing up young people and another state might be completely unsuccessful,” said Josh Archambault, a health policy expert from the Foundation for Government Accountability. “If Illinois is unsuccessful in signing up young people then the health exchange will face a death spiral.”
According to data released by the Department of Health and Human Services, only 1,370 people enrolled in the new health exchanges in October.