California's insurance commissioner Dave Jones announced an agreement with Blue Shield on Tuesday morning that will mean some 113,000 people who had their policies cancelled will now be able to keep them through March 31, 2014.
If you're one of those 113,000 people, you now have the option either to hold onto your policy into next year or to shop on the Covered California marketplace where you might qualify for a subsidy.
Jones says Blue Shield of California Life & Health agreed to send letters on Wednesday to its policyholders, informing them of the extension. If you've received a cancellation notice from another health insurance company, it is highly unlikely you will get an extension, as we detail below.
Blue Shield warned that extension is not without risks. Spokesman Steve Shivinsky says that policyholders who decide to stay with their current plan must still enroll in a new plan that complies with the Affordable Care Act by March 15, 2014. Otherwise, they risk a coverage gap. In addition, if people extend their current policy, they may have to pay a deductible twice in 2014 after they enroll in a new plan.
"It's confusing," Shivinsky said. "It's bad for consumers that we have to mail these letters out and provide even more confusing information when they're trying to sort through their options."
Jones said that consumers must carefully consider their options. "If these consumers anticipate a major health expense in the first three months of next year," Jones said, they should move to a new policy now. He also stressed that people should "look at all your options," especially if they might qualify for a subsidy.
Blue Shield only, not other carriers
Jones could take this move with Blue Shield only because of what he called a "rather complicated series of facts." California, he says, is the only state in the nation that has two separate regulators of health insurance products. Jones regulates policies that fall under the Department of Insurance. The Department of Managed Health Care (DMHC) regulates HMO products and other kinds of health plans.
Because of a special loophole in California law, Jones says, Blue Shield has the option to move its insurance products from the Department of Insurance to DMHC. Jones says that move between regulators requires Blue Shield to provide 180 days' notice of cancellation, but Blue Shield only provided 90 days. Blue Shield disagrees and argues that 90 days' notice was sufficient. Nonetheless it is complying with the Department of Insurance and allowing those 80,000 policyholders — covering 113,000 people — the option to extend.
In any case, an additional 90 days is the maximum extension. "Three months is exactly what we could get" under state law, Jones says.
Shivinsky said that Blue Shield elected to make the move to DMHC to "consolidate its business" under one regulator. He said the company already had about 80 percent of its business in DMHC. It will reduce the "administrative burden," he said.
Jones says he had lobbied Covered California to allow all consumers to renew their individual policies through 2014. But Covered California, he says, determined that all individual policyholders must move to ACA-compliant plans on Jan. 1, 2014.
For all these reasons, if you've received a cancellation notice from any other carrier besides Blue Shield, you should not expect to get an extension.
California's insurance commissioner, Dave Jones, is holding a press conference Tuesday morning to announce a deal the Department of Insurance has reached with what it terms a "major health insurance company" to delay the cancellation of more than 115,000 insurance policies statewide.
The San Francisco Business Times confirmed that the insurer is Blue Shield of California from the company's spokesman, Steve Shivinsky. The Business Times described Blue Shield as not "necessarily happy" with this change. From the Business Times report:
Blue Shield officials said Monday evening that the Department of Insurance had required them to take this step, on threat of a lawsuit compelling the insurer to delay the cancellations. The department declined official comment ahead of the insurance commissioner's press conference.
The extensions can't last more than three months, and must end March 31, Blue Shield said. Consumers need to be aware that taking advantage of the delay could come with downsides, including the possibility of being liable for two sets of deductibles and possibly missing out on tax credits and cost-sharing subsidies available only through the Covered California exchange.
"We had a disagreement with the state over the 90 day notice we gave to ... policyholders and we were faced with a lawsuit if we did not agree to their requirement for the 90 day extension," Shivinsky clarified. He said 80,000 policyholders are being notified of the new course of action that regulators are requiring.
The deal has the look and feel of a political retreat by Democratic officeholders worried about the recent outcry about cancelled individual policies.
State of Health will have update this post after Jones' press conference.