'Fix' for health plan may pose new risks - U-T San Diego

Resurrecting canceled health insurance plans for another year could threaten the financial stability of the Affordable Care Act, some economists say.

Insurance industry officials were quick to voice the concern after President Barack Obama announced Thursday that carriers could extend policies that don’t comply with the new law for one year.

The move came after a groundswell of anger as millions of Americans received notices telling them that they would need to find new coverage by Dec. 31, despite the president’s promises that they would be able to keep their health insurance if they like it.

The canceled plans — there are estimated to be 900,000 in California — generally offer skimpier benefits than are allowed under the Affordable Care Act, which sets maximum amounts on things like deductibles.

While the prospect of canceled policies has made many who are affected angry, economists say allowing them to continue for another year comes with its own risks.

In general, letting people keep their own plans could provide less incentive for them to buy policies in the new health exchanges, said Robert Seidman, a health economics professor at San Diego State University.

Plenty of healthy premium-paying policy holders are necessary to keep exchange-based policies solvent, the economist said.

“This might not bode well for the short-term success of the Affordable Care Act,” Seidman said.

Obama’s announcement on Thursday makes it legal for insurance companies nationwide to extend noncompliant policies through 2014. But it does not require that insurance companies do so. Obama directed each state’s insurance commissioner to work with insurers.

Dave Jones, California’s insurance commissioner, who has already granted a three-month reprieve to more than 200,000 canceled policy holders of Blue Cross and Blue Shield, asked all insurers in the state to extend their canceled plans for one year.

But first, a sticking point must be resolved. Covered California, the state’s new health insurance exchange, made it a contract requirement for each insurance company doing business in the new marketplace to cancel its individual policies at the end of the year.

Jones asked Covered California on Thursday not to enforce that contract clause, but the exchange has not yet responded to the request.

Peter Lee, Covered California’s executive director, declined to say Friday whether the agency will look the other way on the must-cancel provision in its contracts.

“That is something that we are studying and that our board is going to take up on Thursday,” Lee said, referring to the exchange board’s next regularly scheduled business meeting next week.

Economists say extending policies for 12 months could affect premiums.

Joshua Graff Zivin, a health economics professor at UC San Diego, noted that those who currently have simple plans that don’t meet Obamacare’s coverage requirements may, on average, be relatively healthy.

Insurance companies may have been counting on these people being pushed into the exchange to counterbalance the needs of Californians with pre-existing medical conditions who are thought to have bought policies from the exchange the very moment they could do so.