Cancelling the Cancellation: Will Insurers Restore Pre-Obamacare Policies?

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Officials in Albany and Trenton are trying to figure out what a new White House proposal means for local insurance companies and the people who used to be their customers.

Exact numbers are difficult to come by, but hundreds of thousands of people in New York and New Jersey have received “notices of non-renewal” over the last several weeks, because the policies they held no longer meet new, more stringent federal standards.

Many of them have received offers of new coverage that is more expensive than what they had, but experts say those numbers are likely to be relatively small in this region, because individual policies were already quite costly here, due to regulations that required carriers to cover benefits more generously than elsewhere in the country, long before the Affordable Care Act.  

“There may be some customers who would be better off staying with their existing policy in the transitional period,” said Chuck Bell, from the Consumers Union, which has consistently supported the Affordable Care Act. “But by and large, customers will have a much better selection of plans in the exchange than they currently do in this calendar year.”

Other states, however, with lighter insurance regulations had relatively larger numbers of people with individual policies, and much wider spreads between the cheapest and most expensive plans. It is those places that have seen premiums go up the most under the Affordable Care Act, so the sting from canceled existing policies has been sharper.

Ultimately, it is up to insurance carriers to decide whether to restore canceled coverage. Industry insiders say the cost-benefit calculus is complicated, especially because companies priced their new policies based on the assumption they would capture many people migrating from the old ones. If companies maintain those policies and young healthy people stay on them, the new products might disproportionately attract the elderly or ill.

“You’re potentially upsetting the risk pool,” said Ward Sanders, president of the New Jersey Association of Health Plans.

And Sanders said, even if insurers do want to restore those policies, as a practical matter it is not clear whether they could dust them off, update them with new rates, and receive the necessary approvals from state regulators in time to have people covered by the start of 2014.

“People probably don’t understand the amount of work it would take to get these products back on the market,” he said. “That’s a pretty quick flip of the switch.”