ILLINOIS: Land of Lincoln enrollee coverage stops at the END OF SEPTEMBER

I mentioned this yesterday in my "back from vacation" post, but it's important enough to deserve a separate follow-up post...especially given the clarification about the coverage cut-off date:

Land of Lincoln coverage will end Oct. 1 for individual enrollees

Land of Lincoln Health's insurance coverage for its individual enrollees will end Oct. 1, according to the Illinois Department of Insurance.

The agency posted the news on Land of Lincoln's website. A green banner now greets visitors to the website with the headline, "Important notice to all members" with a link taking them to information about the Chicago-based insurer's impending shutdown. The notice comes a week after the agency moved to seize control of the financially troubled Chicago-based insurer.

The failure of Land of Lincoln has triggered a "special enrollment" period under the federal Affordable Care Act that will allow the insurer's approximately 39,000 individual enrollees to pick a new plan for the last three months of the year on Healthcare.gov, the federal health insurance marketplace. The notice advised employers who purchased group coverage from the company to contact their insurance agent or broker to explore their options. Land of Lincoln has about 10,000 group enrollees.

According to the notice, the special enrollment period will run from Aug. 2 through Sept. 30, for coverage starting on Oct. 1. There will be a second enrollment period from Oct. 1 through Nov. 29, for coverage starting on the first of the following month.

Most of the Co-Ops which have gone belly-up (along with a handful of private carriers such as WINhealth of Wyoming) have at least been able to keep their existing enrollees covered through the end of the year, allowing for a reasonably smooth transition over to a new carrier the following year. Unfortunately, in a few cases (most infamously, Health Republic of New York), the financial situation has been so ugly that they couldn't even pull that off; the plug was pulled mid-year, requiring enrollees to scramble for temporary coverage to get them through the end of the year. Land of Lincoln falls into this category, as does Oregon's Health Co-Op, which is cutting things off at the end of July.

Adding to the frustration and anger, Land of Lincoln enrollees will have their deductibles reset back to the full amount under whatever plan they switch to. In other words, let's say their current Land of Lincoln policy had a $3,000 deductible at the beginning of 2016, and they've used up $2,500 of that so far. If LoL was able to stay operational through the end of the year, they would only have $500 left before their full coverage kicked into effect.

Unfortunately, as stated in the official LoL public announcement FAQ:

If I enroll in a new plan, will I be credited with the deductible and out of pocket expense payments I have made?

Your obligation to pay deductibles and out of pocket expenses will be “reset” when you enroll in a new plan. The deductible and out of pocket expense payments you have made under your plan with Land of Lincoln will not carry over to the new plan you select. You will have to meet the new deductible and out-of-pocket expense requirements of the replacement plan you select.

Yup...if the new policy they switch to has a similar $3,000 deductible, they'll still have to pay that full amount before the carrier coverage kicks in. Worse yet, remember that the new policy will only be effective for 3 months before the deductible is reset again for 2017.

Among the many modifications which needs to be made to the ACA, this is a big one: If someone loses their coverage mid-year due to their carrier going out of business and not being able to continue coverage through the end of the year, the enrollee should be credited for the full deductible/co-pay amount they've already paid out.

This may seem unreasonable, but think about it: "Resetting" the deductible strikes me as being a breach of contract. Remember, insurance policy premiums and coverage are done on a month-to-month basis...but the deductible applies to the full year.

At the very least, the deductible should be pro-rated for the portion of the year that they're covered. If the new policy has a $3,000 deductible but they'll only be enrolled in it for 3 months, drop it to $750 (1/4 of $3,000).

Of course, there are 2 problems with this: First, what if people game the system by deliberately holding off on enrolling in order to take advantage of a tiny deductible in the last few months of the year? Well, my suggestion would be written to only apply to cases where the coverage is lost due to the current carrier going out of business/being unable to continue the policy through the end of the year.

The second problem is that it's not the new carrier's fault that the current one went belly up; why should they have to eat the partial deductible amount? To be honest, I'm not sure what the solution to that would be. If it's a Co-Op, the federal government should foot the bill, since they're the ones who established them; if it's a private carrier, I suppose the bill for the balance should be added to the defunct carrier's pile of IOU's? (NOTE: See update below for how Oregon handled this...and why other carriers may want to offer "credit").

Anyway, it's not pretty.

UPDATE: Thanks to Richard Mayhew for calling this to my attention: In the case of Oregon's Health Co-Op, enrollees will receive credit for the portion of their deductibles/co-pays towards their new policy:

Oregon's Health CO-OP members in the individual market can purchase a plan from a new carrier and get credit for any money they have paid toward their deductibles and out-of-pocket maximums, officials said Monday.

The Oregon Department of Consumer and Business Services, Division of Financial Regulation placed the financially struggling CO-OP in receivership last week.

All CO-OP plans will end Sunday, July 31, and the state will wind down CO-OP operations and liquidate the company. Oregon's Health CO-OP is a nonprofit consumer operated and oriented health insurer (CO-OP) formed under the Affordable Care Act.

"It is unusual for plans to be canceled in the middle of the year, so we have been working hard and thinking creatively about how to better this situation for consumers," said Patrick Allen, DCBS director.

"Although CO-OP members will have to switch plans, they will not lose the money they already have paid into their plan for deductibles and other out-of-pocket expenses."

Individual members can go to HealthCare.gov, call the HealthCare.gov call center, or work with their insurance agent to enroll in a new plan that will be effective Aug. 1.

DCBS strongly encourages all CO-OP individual members reach out to their local agent or health insurance marketplace call center. Oregon insurers offering plans in the individual market have agreed to honor money already spent toward deductibles and out-of-pocket maximums, so consumers do not have to start over on their new plans.

"We appreciate the willingness of Oregon's insurance companies to help us protect these policyholders, who have to switch plans through no fault of their own," Allen said.

In fact, something else Mayhew just posted makes it clear that it might actually be in the best interest of the other Illinois carriers to voluntarily offer to accept "deductible credit" from the LoL enrollees:

@charles_gaba @xpostfactoid @LouiseNorris Will be ugly risk dump on Illinois insurers as only the sickest will go over and they go platinum

— Richard Mayhew (@bjdickmayhew) July 20, 2016

In other words, by not "carrying over" the paid deductibles, lower-risk LoL enrollees are more likely to say "screw this, I'll hold out until January", cross their fingers and sweat out the remaining 3 months of the year...while higher-risk enrollees (ie, those who are already undergoing chemotherapy sessions or whatever) will have no choice but to switch to another carrier for the final quarter. Since they won't want to double-pay their deductible, they'll likely enroll in Platinum plans which have tiny deductibles or none whatsoever, making the carriers eat a big chunk of expenses.