Cali Decision to Extend Old Policies Means More Trouble for Cover Oregon
The Insurance Division may have had little choice but to let individuals and small businesses keep substandard policies, but the move means fewer customers for the exchange and a higher risk group for those who do shop on Cover Oregon. The Division is also charged with allowing inferior policies to be sold on Cover Oregon compared to outside the exchange.
Editor's Note: An earlier version incorrectly stated that the state's two insurance co-operatives are available only on Cover Oregon. Health Republic and Oregon's Health Co-op also sell policies directly from their web sites.
Update: This article has been updated following a conversation with Oregon Insurance Commissioner Laura Cali:
A recent decision by the state insurance commissioner to allow insurers to extend substandard policies for another year may further decimate the imperiled state insurance exchange, Cover Oregon.
“There’s a massive amount of work to be done with a massive amount of anger among employers,” said Rick Skayhan, an agent at Leonard Adams Insurance in Portland. “It’s going to devastate the exchange. People are going to stand pat,” and avoid Cover Oregon.
Cover Oregon is set up to get $15 a head for every policy sold on its exchange, something that will happen less often if individuals and businesses are encouraged to keep their old policies. The move will also increase the insurance risk for those policies sold on the exchange, since a greater share of its customers will be those unfortunate people who had been denied earlier coverage.
“You’ve just crafted an adverse selection group,” Skayhan said. “You’re only letting in the people desperate for business.”
Skayhan said a number of people employed by small businesses would have jumped to the exchange if it were operating, and small businesses may have chosen to enter the exchange’s SHOP program and taken advantage of its subsidies.
But now that President Obama and Insurance Commissioner Laura Cali have allowed the older, cheaper, flimsier plans to be sold for another year to existing customers, Skayhan’s advising his business clients to just stay put rather than risk the exchange or opt for the pricier plans compatible with the Affordable Care Act.
Cali said some consumers may still find they’re getting a better deal if they can gain access to the subsidies and more comprehensive insurance sold on Cover Oregon.
She also noted that individuals can sign up for coverage now, cancel that policy, and sign up for a Cover Oregon policy through the end of March once the bugs are worked out of the site, if they are worried about a gap in coverage. "Anytime during the open enrollment period, they can change plans," Cali said.
She said that insurers who extend the old policies would not have the choice to pick or choose customers or what plans they want to extend. It’s either all or nothing. “It’s the option of the consumer to accept it or not,” Cali told The Lund Report.
Cali gave health insurance companies the option of extend the sale of substandard policies to existing customers through the end of the open enrollment period on March 31 or the end of next year. Moda Health and PacificSource opted for March, while the other six major insurers on the Oregon individual market will continue to sell old plans good through Dec. 31, 2014.
Most of the policies that insurance companies had been canceling were substandard catastrophic plans that favor the rich and healthy, particularly men. But in some states, like Pennsylvania, insurance companies have been using the incoming exchange as an excuse to dump their higher-risk “guaranteed issue” policies, forcing these customers onto the federal exchange where their customers may pick another insurer.
If insurers in Oregon wanted to extend their substandard policies, they would also have to extend higher-risk policies to these customers, but Skayhan’s seen less evidence these plans had been canceled.
The healthcare advocate at the Oregon State Public Interest Research Group, Jesse Ellis O’Brien, countered Skayhan’s arguments that Cali’s move will cripple the exchange, noting that many uninsured people are young and healthy and will want to buy subsidized insurance on Cover Oregon to avoid a 1 percent income tax.
“It probably means a smaller base of customers for the exchange in the first year, but it’s not clear how much smaller. I think this will depend a lot on how well the public is informed about their choices,” O’Brien wrote in an email to The Lund Report. “Many folks in these plans will actually get a much better deal—more coverage for less—on Cover Oregon, if and when they go shopping there, but they have to know to go there, and how to sign up.”
O’Brien added that his organization supported Obama and Cali’s move because of dysfunction at Cover Oregon, despite the tremendous uncertainty the decision gives to the market and the viability of the exchange. If Cover Oregon was operational, the move would be unnecessary, he said, but because of its delays and technological troubles, the insurance commissioner had little choice.
“We do not want anyone to lose coverage due to being unable to access Cover Oregon and the federal tax credits,” he wrote.
At the rate review period next spring, O’Brien said insurers will have little excuse to raise rates solely because of Cali’s decision, and Skayhan agreed that insurance companies will have to set rates based on their entire book of business, both inside and outside the exchange.
In that sense, insurance companies that offer the best rates on Cover Oregon, like Moda Health and LifeWise Health Plan, will be buoyed by the plans they sell outside the exchange, even if they have to contend with a less healthy population on the exchange.
Cover Oregon Plans More Limited
Even before the decision, Skayhan was helping small business clients keep their old, substandard policies for 11 more months by signing them up Dec. 1, avoiding the requirements of the Affordable Care Act which hit Jan. 1 until the next time they renew.
Skayhan has also been advising individuals and small businesses who want the more comprehensive policies to avoid Cover Oregon unless they expect to qualify for hefty subsidies because the plans are not as good as some of those sold outside the exchange.
He said all the major insurers except Moda Health drastically scaled back the number of healthcare providers in their networks for the plans sold on Cover Oregon, but not those sold outside the exchange. He added that Moda’s “gold plan” sold outside the exchange had a richer design than the one on Cover Oregon.
Gov. John Kitzhaber had campaigned on the premise of uniformity across the individual and small business insurance market, with “an even playing field” inside and outside the exchange — but if the governor and his allies have trumpeted that publicly, it’s not what happened. The Cover Oregon plans in some cases have smaller networks and larger deductibles.
“Someone failed to ask the right questions,” said Skayhan, who accused the Insurance Division of either being willfully negligent when the insurance companies drafted their policies or incompetent.
Cali conceded that there are a wider menu of options outside the exchange, but all new plans sold in Oregon must cover the same essential health benefits and meet the same actuarial value. Moda Health's plan outside the exchange may have some minor bonuses, but the company's gold plan sold on the exchange is still a rich plan.
"There may be other differences beside the networks," Cali said.
The differences may encourage anyone too wealthy to receive subsidies to avoid the exchange, but Cali noted that if there is any chance that a consumer might get a tax credit, they should pick Cover Oregon, because they can always claim the credit later. The worst-case scenario would only be that they pay full freight for the policy, something that would happen outside the exchange regardless.
But the uneven playing field may have encouraged Regence BlueCross BlueShield to only offer its expensive Bridgespan Health Plan to individual customers as a foothold on Cover Oregon, while foregoing its traditional offering and choosing not to participate in the SHOP program for small employers.
An easy scapegoat for this problem would be former Insurance Commissioner Lou Savage, who left the Insurance Division this summer to participate in a humanitarian mission in Tunisia. Cali was the Insurance Division’s chief actuary when the insurance companies presented them with two very different sets of plans to be sold inside and outside the exchange.
“[Insurance agents] have to discern the games,” Skayhan said. “The insurers are not telling everything. The insurance commissioner’s not telling everything.”
Nov 26 2013