State insurance chief faults health exchange for cancellations

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Stepping into the national backlash over health policy cancellations, California Insurance Commissioner Dave Jones faulted the state’s health exchange for requiring insurers to terminate coverage Dec. 31, but acknowledged that he has little power to stop it.

Jones reiterated his support for President Obama’s healthcare law Tuesday, but he said these cancellation notices and the resulting avalanche of consumer complaints were an unnecessary blunder.

“There are areas where implementation could be done better, and this is an example of that,” Jones said. “Individuals could have been allowed to stay in their plan for another year. Don’t force people out arbitrarily Dec. 31.”


With that in mind, Jones said he pressured Blue Shield of California to offer an extension until March 31 to about 113,000 customers. Their policies were being canceled Dec. 31 because their coverage doesn’t meet all the requirements of the Affordable Care Act.

Overall, an estimated 1 million Californians with individual health insurance have received termination letters in recent weeks. They are among several million people affected nationwide.

Covered California, the state insurance exchange, estimates that nearly 600,000 of those customers getting cancellation notices may see higher rates next year while also benefiting from more comprehensive coverage.

Jones said Blue Shield failed to give the affected customers adequate notice of the change. State regulators will scrutinize cancellation notices from other companies, Jones said, but he downplayed the idea that other insurers will be forced to make similar moves.

“If I see legal violations I will enforce the law, but I’m doubtful much else will change,” he said.

People who bought their individual coverage before March 2010, when the healthcare law was enacted, and kept it in place have a “grandfathered” policy. They aren’t affected by the current changes in the market.


Peter Lee, executive director of Covered California, has defended the exchange’s requirement for health plans to end current policies Dec. 31. He says consumers will benefit in the long run from having more people in the larger risk pool, which will influence future rates.

Lee and others had worried about insurers cherry-picking their healthier customers and renewing them for another year through most of 2014, as permitted under the healthcare law.

The state exchange said Tuesday that 227,002 insurance applications have been started during the first month of enrollment.

“Covered California has always been guided by the vision of starting 2014 with a level playing field and a single risk pool, which allows Californians to get better benefits in a more stable market,” Lee said.

Jones said he isn’t sure that the fears about the risk pool are warranted and that the effect on existing policyholders should be paramount.

“I’m not convinced it would have been fatal to the risk pool,” Jones said.

The insurance commissioner said if Blue Shield policyholders take advantage of the three-month extension they could save $28.6 million in premiums overall.


Blue Shield customers must decide whether to extend their coverage by Dec. 6. Notices to affected policyholders will go out this week.

The San Francisco insurer said the changing deadlines may confuse customers and lead some people to pay a deductible twice in one year after they enroll in a new plan for 2014.

“We believe the agreement we had to strike with the Department of Insurance is bad for consumers,” Blue Shield spokesman Steve Shivinsky said.

Consumer advocates reminded policyholders that extending their current health plan may not be the best option with new options available under the healthcare overhaul.

“We don’t want folks to miss out on subsidies to make coverage more affordable,” said Anthony Wright, executive director of Health Access, a consumer advocacy group. “There are likely better value plans out there because of the Affordable Care Act.”


Twitter: @chadterhune