END OF 2018 OPEN ENROLLMENT PERIOD (42 states)

Time: D H M S

The NeverEnding Story: CMS bumps out "grandmothered" plans ANOTHER year.

When the ACA exchanges were first launched in October 2013, there were roughly 10.6 million people enrolled in pre-ACA individual market policies. These fell into two categories:

  • Those still enrolled in the same policy they had been as of March 2010 (when the ACA was signed into law)
  • Those who enrolled in policies between April 2010 - September 2013

Those in the first category were allowed to hold onto their existing policies for as long as they wished (or at least until they died or their carrier voluntarily chose to discontinue them). These policies were "grandfathered" in pretty much forever.

The second category is what caused a massive amount of anger and confusion immediately after the exchanges launched, as several million people received cancellation notices in the mail telling them that their policy was being discontinued effective New Year's Eve 2013 due to it not being compliant with ACA requirements. I received one of these myself; my wife and I, both self-employed, were enrolled in a Blue Cross Blue Shield of Michigan policy which we knew wasn't ACA-compliant because it didn't include mental health coverage, for instance.

Now, the truth is that the insurance carriers had already had three years to bring their plans into compliance with the law's requirements, and most had failed to do so for as long as possible, so it's not like this was a big surprise to any of them. However, since President Obama had (foolishly, in my view) repeatedly stated that "If you like your plan, you can keep it!" throughout the campaign, many people understandably assumed that this meant their plans would be around forever as well.

In response, on Nov. 13, 2013, President Obama announced that:

...I completely get how upsetting this can be for a lot of Americans, particularly after assurances they heard from me that if they had a plan that they liked, they could keep it. And to those Americans, I hear you loud and clear. I said that I would do everything we can to fix this problem. And today I'm offering an idea that will help do it.

Already, people who have plans that predate the Affordable Care Act can keep those plans if they haven’t changed. That was already in the law. That's what's called a grandfather clause. It was included in the law.

...Today, we're going to extend that principle both to people whose plans have changed since the law took effect, and to people who bought plans since the law took effect.

So state insurance commissioners still have the power to decide what plans can and can’t be sold in their states. But the bottom line is, insurers can extend current plans that would otherwise be canceled into 2014, and Americans whose plans have been canceled can choose to re-enroll in the same kind of plan.

Obama's original 11/13/13 announcement allowed these policies to be bumped out until the end of 2014. Then, on 3/5/14, the HHS Dept. announced that to heck with it, they were gonna allow those policies to be bumped out even further, all the way into October 2017, again, at the discretion of the insurance commissioners and carriers in each state which allowed it at all. Finaly, they said "screw it" and rounded things out to December 31, 2017, just to line things up with the calendar year.

These policies, which were enrolled in between March 2010 and September 2013, are known as "transitional" or "grandmothered" policies.

Cut to today:

CMS announced Thursday that it would extend issuers' ability to sell ACA non-compliant individual and small group plans through most of 2018. Without the change, all plans not complying with ACA market reforms would be phased out as of Dec. 31, 2017, but industry has been urging CMS to extend the policy and sources expected the agency would take action through guidance.

Despite arguments that allowing people to keep non-compliant plans may have resulted in adverse selection, stakeholders want them to remain.

The only part of this news which I find slightly surprising is that the insurance carriers support it. As I noted in 2015:

Why was this a problem? Well, for one thing, this seriously impacted how the actuaries for the various companies in each state calculated their premium rates for the brand-new 2014 ACA-compliant policies.

Let's say it's September 2013, and you have a state with 2 insurance carriers: Big Blue and Little Guy Healthcare. Big Blue has 5,000 enrollees in policies already compliant with ACA rules, and another 45,000 in non-compliant plans. Little Guy is just breaking into the individual market for the first time (the CO-OPs would fall into this category along with some commercial carriers).

With the ACA rules in hand, both companies start crunching the numbers to figure out how much to charge for their new ACA-compliant 2014 policies. Big Blue knows that they're gonna have to kick 90% of their customers off of their current policies...and that some of those 40K might decide to abandon them in favor of Little Guy. They set their new policy rates accordingly in an attempt to retain those customers.

...Suddenly, Little Guy's pre-October actuarial enrollment projections for 2014 are meaningless. They thought that up to 40,000 inexpensive, low-risk potential customers were about to be put on the market for them to scoop up. Instead, most of those 40K are staying right where they are. Little Guy still has plenty of people to market themselves to...but they were relying on those 40K in particular, since not only is that group low-risk, they're also highly reliable (that is, these are people who have already been reliably paying their monthly premiums for many months or years).

...etc, etc.

However, at this point in the game, given that a) there are likely only perhaps 1-1.5 million people still enrolled in "transitional" plans by now anyway and b) the complete mystery about exactly what the hell the GOP is actually going to do with the ACA for 2018, I suppose it's just as well. Any damage from "adverse selection" along the lines of my example above is probably already done by now anyway, and there's so much uncertainty at this point that I suspect that the carriers were already assuming those remaining "transitional" enrollees couldn't be counted on regardless.