Printed letters, November 15, 2013

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While Sentinel readers should empathize with the predicament John Pennington and other similarly situated insureds receiving cancellation letters now find themselves in (“Government owns blame for health-care cancellations”), his assignment of blame is belied by two companion articles:  “Health law will be fixed, president says” and “’That’s on me,’ Obama says of blunders”.

Since well before the Affordable Care Act (“ACA”)was enacted, health insurance policies have been one-year contracts, subject to cancellation at any time for “cause” (i.e., for concealing some “pre-existing condition” or exceeding annual or lifetime coverage limits)and – particularly – at annual renewal (when insurers often raised premiums and/or reduced coverage).

Thus, given the cost of his condition to his insurer, Pennington might well have received a cancellation letter even if the ACA didn’t exist.  Indeed, one purpose of the ACA was to eliminate arbitrary policy cancellations.

The ACA explicitly “grandfathered” all policies in-force as of March 23, 2010 – without regard for whether they complied with the ACA’s minimum coverage standards—but prohibited issuance of non-compliant policies after December 31, 2013.  The ACA thus created a “window of opportunity” for health insurers between those two dates. 

Too many insurers exploited that opportunity using “bait and switch” marketing ploys—inducing insureds to convert from “grandfathered” to “non-grandfathered” policies and continuing to issue non-compliant policies—without informing insureds that those policies would be cancelled by January 1, 2014, and/or that similar coverage might be available on insurance exchanges, even at lower premiums from the same company.

Consequently, responsible state insurance regulators are already taking action against some insurers, and yesterday President Obama gave all insurers permission to rescind this year’s cancellation letters in some circumstances.

Meanwhile, the “pre-existing condition” of annual cancellation letters has been exacerbated by the malfunctioning insurance exchange websites—making it more difficult for insureds like Pennington to shop for alternative coverage.

Thus, there is plenty of blame to go around.

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