Why has wave of Obamacare insurance cancellations mostly missed Texas?
by Robert T. Garrett
December 02, 2013
Source: Dallas Morning News
Insurance companies, brokers and consumer advocates say a highly publicized national wave of health plan cancellations largely bypassed Texas.
There are several complex reasons, but one of the biggest is this: Following the example of Arkansas and other Southern states, the Texas Department of Insurance told health insurers in June that they could compress the contractual period of this year’s policies. That meant they could be renewed late this year.
The little-noticed advisory may have steered as many as 2.2 million Texans who are in individual or small-group plans around the federal health care law’s demands for richer benefits and tighter caps on out-of-pocket expenses until almost 2015.
So when President Barack Obama tried to quell a political furor by announcing Nov. 14 that canceled policies could be extended for one more year, it had little practical effect in Texas.
Insurance broker John Krantz of the McLaughlin Brunson Insurance Agency of Dallas says early renewal already was the choice of more than 95 percent of the small business owners and individual policyholders he knows.
“It’s high 90s, like 97 percent,” said Krantz, who advises about 200 of his firm’s 1,200 business clients. “It was an easy choice for the insured.”
Krantz said most people who clung to old plans swallowed rate hikes of between 5 percent and 11 percent. That way, they ducked increases of 40 percent or more on plans their carriers offered that immediately would comply with federal rules. Clients, though, expect they’ll have to pay much higher rates when they renew late next year, he said.
The sputtering rollout of the federal government’s online marketplace and Obama’s apology for having told Americans they could keep policies they liked have raised questions about the law and the administration’s competence. But they also have highlighted how little information is collected and available about the 16 percent of Texans, or 4.2 million, who last year were in health plans that the Texas Department of Insurance regulates.
The agency “does not collect that data,” spokesman John Greeley said, speaking of the 4.2 million figure.
The Kansas City-based National Association of Insurance Commissioners compiles it from industry surveys, he said. The number includes enrollees in plans by which a small or large employer has decided not to self-insure and shifts risk to a carrier instead.
It also encompasses the 752,000 Texans who last year had coverage in the individual market, where single people and families buy plans with no help from an employer.
Greeley also acknowledged that while the department may challenge a rate that it deems unjustified in homeowner’s and auto policies, it has no authority to deny excessive premiums in health insurance plans.
Nor does it keep track of cancellations and early renewals, he said.
“This is a business decision to be made by the insurer,” he said.
Krantz, the Dallas broker, and other people who closely track Texas’ individual market said only a few carriers in recent months canceled policies that would not pass muster under federal rules next year.
Among those canceling at least some Texas policies, they said, were market leader Blue Cross and Blue Shield of Texas and No. 4 player Humana Inc.
A Blue Cross spokeswoman declined to comment. Humana spokesmen did not respond to messages.
UnitedHealthcare and its subsidiary Golden Rule, which together command the second-biggest slice of the state’s individual market, and insurers Aetna and Cigna said they didn’t cancel policies. The three carriers said they simply offered early renewals so policyholders could extend existing coverage into late 2014.
Health economist Devon Herrick of the Dallas-based National Center for Policy Analysis, a conservative think tank, said Texas escaped some of the recent turmoil because its GOP leaders did not want to help the federal law’s state insurance exchanges succeed.
In states such as California and Washington, which created their own exchanges and supported the law, officials decided to press for elimination of the old policies, he said.
“The insurance commissioner literally said, ‘In California, as part of the contractual arrangement to sell policies in the exchange, you must cancel those policies outside the exchange,’” Herrick said. “It’s you’re all in or you’re all out, basically. Well, they didn’t do that in Texas.”
The state’s hands-off approach has a downside, though, said Stacey Pogue, senior policy analyst at the center-left Center for Public Policy Priorities think tank in Austin.
People with low to moderate incomes can only receive the federal law’s subsidies if they buy plans through the exchange, she noted. Their staying in policies marketed outside the exchange may benefit the carrier but isn’t necessarily the consumer’s best deal, she said.
Pogue said she’s worried that insurers aren’t fully advising customers on their options.
An early renewal notice that Aetna mailed to a family of four Texans, apparently in late September, mentioned possible subsidies only in a footnote at the bottom, said Pogue, who shared the letter with The Dallas Morning News.
Aetna spokeswoman Anjie Coplin defended the letter, noting it had a link to the website of the Kaiser Family Foundation and its subsidy calculator.
“HealthCare.gov did not launch” until Oct. 1, she wrote in an email, referring to the troubled federal website. Coplin said Aetna has 60,000 Texans in individual-market policies. She wouldn’t say how many are in small-group plans.
Federal health officials issued guidance last week for carriers to notify consumers of their options. But the Texas insurance department’s Greeley said state law doesn’t require health insurers to share with regulators their notices to customers about policies being discontinued.
Pogue said there have been complaints about insurers’ letters in several states. The carriers’ notices clearly sought to scare policyholders into quickly re-upping with them before policyholders shopped for insurance and tax credits on the Obamacare marketplaces, Pogue said.
“At minimum, they need to be looking into these letters,” she said of state regulators. “Consumers may be getting unclear if not misleading information.”
Some carriers said they offered complete information on options throughout the summer and fall.
“We’ve had a pretty aggressive campaign to help people make decisions that are best for themselves and their families,” said Joe Mondy, a spokesman for Bloomfield, Conn.-based Cigna. It covers 55,000 Texans in individual policies and another 1.1 million in large group plans, he said.
Greeley also declined to end confusion about whether the department is allowing the one-year extensions Obama has urged, as reported by The Washington Post and other national news outlets.
Last week, America’s Health Insurance Plans, the carriers’ main trade group, said Texas is still weighing its options.
“I don’t think we can characterize … whether or not we are allowing insurers to continue to offer health plans that don’t meet the [Affordable Care Act] requirements,” Greeley said. “We are not enforcing the ACA, and therefore, we are not telling insurers how to run their business on this.”