Health Care Cancellation Cure Could Lead To Higher Premiums

The health care fix announced by President Obama on Thursday may be good news for some consumers, but it creates a big headache for insurance companies and regulators. An insurance industry trade group warns the last-minute change could destabilize the market and lead to higher premiums.

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The president's troubles started when insurance companies began sending out letters telling people their policies would not be renewed because of Obamacare. The president's announcement puts the onus back on the companies, saying they can extend the plans if they want. Insurance executives are coming to the White House today to meet with the president, and many are unhappy about his announcement. An insurance company trade group contends the last-minute change could destabilize the market and lead to higher premiums.

NPR's Jim Zarroli reports.

JIM ZARROLI, BYLINE: The change announced by President Obama yesterday seemed simple enough.

(SOUNDBITE OF SPEECH)

PRESIDENT BARACK OBAMA: But the bottom line is insurers can extend current plans that would otherwise be cancelled into 2014, and Americans whose plans have been cancelled can choose to reenroll in the same kind of plan.

ZARROLI: But in the insurance business, nothing is simple, especially not where the Affordable Care Act is concerned. Brian Haile is senior vice president for health policy at Jackson Hewitt Tax Service. Haile warns that restoring a lot of cancelled policies is a lot more complicated than it sounds.

BRIAN HAILE: I think it's an enormously heavy lift, and the practical implications of trying to get something like this done in the 47 days before we move to the full implementation of the market reforms is quite daunting.

ZARROLI: Haile says a lot of people have had their policies cancelled. Many of these were no-frills policies that could be bought cheap. If given the option, Haile believes some consumers will go back to them, especially younger ones.

HAILE: Those are disproportionately individuals who are going to be younger and potentially healthier. Those are the ones who are most likely to want to keep their plans.

ZARROLI: But Haile says a lot of other people will continue looking for something better than they have on the government-run exchanges, and they'll tend to be older and a bit less healthy. Haile says all this can wreak havoc on insurance rates.

HAILE: How do you unscramble this insurance omelet once you've broken the shells of the risk pool?

ZARROLI: For the insurance industry, the president's move throws a giant monkey wrench into their business plans. The Affordable Care Act was supposed to send millions of healthy young customers their way. Now some of them may not be coming, at least for another year.

Yesterday, America's Health Insurance Plans, the industry trade group, warned that the administration's policy shift could destabilize the market and lead to higher premiums. It also said additional steps must be taken to mitigate the impact on consumers. One big question is how state regulators will respond. Many typically take months to approve rate changes. Insurance industry officials say if the new policies are going to succeed, regulators will have to be more flexible.

Susan Millerick is a spokeswoman for Aetna.

SUSAN MILLERICK: We will need their support to update our policies and secure appropriate rates so that we can get these plans back on the market and sell them to people.

ZARROLI: But some regulators were already balking at the president's move yesterday. The state of Washington said it would not allow insurance companies to reinstate cancelled policies because of serious concerns about cost. The National Association of Insurance Commissioners said it's unclear how the changes proposed by the president can be put into effect. Arkansas' insurance commissioner, Democrat Jay Bradford, said he believes most state regulators will do what it takes to implement the changes.

JAY BRADFORD: The government is not quick. We all know that. This is a major concern to a lot of people. That's why these changes, on a national basis, are happening, and my fellow commissioners, they're there to protect the consumers. I can't see that that's going to be a major problem. I think any commissioner could make it a priority.

ZARROLI: But for now, the president's policy shift change has introduced a new note of uncertainty into an already tumultuous marketplace, leaving a lot of people scrambling to decide how to respond.

Jim Zarroli, NPR News, New York.

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