Why some health plans have been dropped

Posted on: Wednesday, November 20, 2013

Unless you’ve been living in a cave until today, you probably know that there have been serious controversies regarding President Obama’s repeated assertions that people who liked their health insurance plans would get to keep them once the Affordable Care Act is fully enacted on January 1. In fact, this was not the truth. Approximately five percent of the insured in this country, between ten and fifteen million Americans, purchased individual market insurance. Many of these people have plans which do not meet the minimum standards of the Affordable Care Act, and that is why these plans were dropped.

Under the Affordable Care Act, all insurance plans are required to include these 10 essential features:

  1. Outpatient care
  2. Emergency room visits
  3. Hospitalization
  4. Maternity and newborn care
  5. Prescription drugs
  6. Mental health and substance abuse treatment
  7. Lab tests
  8. Pediatric services, including dental and vision
  9. Preventative and chronic care services
  10. Rehabilitative care

Grandfather Clause

The designers of the ACA included a grandfather clause, stating that anyone who purchased a policy which failed to meet the basic requirements before the law was passed (March, 2010), could keep their policy. This may have seemed like a reasonable solution, but two factors conspired against this seemingly failsafe plan.

  • Insurance companies have no incentive to maintain these policies, since they are otherwise redundant under the new health care law, so they simply elect to cancel them.
  • Most people in the individual market do not keep their policies longer than a year, thus the grandfather clause would not apply to the majority of these policyholders by 2014.

The future of the Affordable Care Act

In an attempt to quell a public and political furor triggered by millions of cancellation notices, President Obama has since said that insurers should be permitted to continue to carry these individual coverage plans for existing customers. This decision may cause more havoc with the system, since insurers have already planned for 2014 without these controversial policies. A few state’s insurance departments have announced that they will not allow this change to take place, and more may join them. The U.S. House of Representatives has passed a bill which would allow insurers to continue to sell these policies to new customers; a change which the President has said that he will veto. 

Considering the fluidity of the situation, insurance professionals and the general public alike are advised to monitor events. Stay tuned. 

Still confused? Core Benefits Group can help. Please call us at 1-877-214-2969.

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