Blue Shield forced by state to delay its Obamacare cancellations

California Insurance Commissioner Dave Jones will announce Tuesday an agreement with a “major health insurance company” in California to delay by three months cancellation of more than 115,000 individual policies due to Affordable Care Act rules. UPDATE: On Tuesday morning, Blue Shield of California clarified that the 80,000 policies in question cover 113,000 people.

  • 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 deal has the look and feel of a political retreat by Democratic officeholders worried about the recent outcry about cancelled individual policies. Technically, insurance regulators reached a deal with Blue Shield of California Life & Health Insurance Co., a subsidiary under DOI’s regulatory umbrella. The deal only affects non-grandfathered policyholders, and includes what Blue Shield described as “significant risks to policyholders,” including potentially facing two deductible limits in a single year.
  • 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.

Blue Shield noted in a statement to the Business Times that the three-month extension is likely to be most appealing to “healthy individuals who use few health care services,” and as a result could damage Covered California’s efforts to recruit as many healthy policyholders as possible to counteract the expected interest by older, sicker Californians in signing on. Without an influx of young, healthy policyholders, “average medical costs for people in the Exchange will be higher, which could result in premium increases in 2015 for everyone,” Blue Shield’s statement said.

Blue Shield has about 119,000 individual policyholders whose policies are being cancelled at year-end, although many of them have the option of moving into other Blue Shield plans, some of which are considerably more expensive.

Jones’ late Monday media advisory said that 115,000 policyholders “may keep lower priced, wider network policies through first quarter of 2014,” potentially the first hole in the dike, given many consumers’ unhappiness about the cancellation of individual plans they thought President Barack Obama had promised not to take from them.

As many as 1 million individual and family plan enrollees in California may face cancellation of existing coverage at year-end due to Obamacare and contracts signed with Covered California, as the Business Times reported late last week.

*Modified from a Bizjournals.com article

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