Sticker shock often follows insurance cancellation
MIAMI (AP) - Dean Griffin liked the health insurance he purchased for
himself and his wife three years ago and thought he'd be able to keep
the plan even after the federal Affordable Care Act took effect.
But the 64-year-old recently received a letter
notifying him the plan was being canceled because it didn't cover
certain benefits required under the law.
The Griffins, who live near Philadelphia on the
Delaware border, pay $770 monthly for their soon-to-be-terminated health
care plan with a $2,500 deductible. The cheapest plan they found on
their state insurance exchange was a so-called bronze plan charging a
$1,275 monthly premium with deductibles totaling $12,700. It covers only
providers in Pennsylvania, so the couple wouldn't be able to see the
doctors in Delaware whom they've used for more than a decade.
"We're buying insurance that we will never use and
can't possibly ever benefit from. We're basically passing on a benefit
to other people who are not otherwise able to buy basic insurance," said
Griffin, who is retired from running an information technology company.
The Griffins are among millions of people
nationwide who buy individual insurance policies and are receiving
notices that those policies are being discontinued because they don't
meet the higher benefit requirements of the new law.
They can buy different policies directly from
insurers for 2014 or sign up for plans on state insurance exchanges.
While lower-income people could see lower costs because of government
subsidies, many in the middle class may get rude awakenings when they
access the websites and realize they'll have to pay significantly more.
Those not eligible for subsidies generally receive
more comprehensive coverage than they had under their
soon-to-be-canceled policies, but they'll have to pay a lot more.
Because of the higher cost, the Griffins are
considering paying the federal penalty - about $100 or 1 percent of
income next year - rather than buying health insurance. They say they
are healthy and don't typically run up large health care costs. Dean
Griffin said that will be cheaper because it's unlikely they will get
past the nearly $13,000 deductible for the coverage to kick in.
Individual health insurance policies are being
canceled because the Affordable Care Act requires plans to cover certain
benefits, such as maternity care, hospital visits and mental illness.
The law also caps annual out-of-pocket costs consumers will pay each
In the past, consumers could get relatively
inexpensive, bare-bones coverage, but those plans will no longer be
available. Many consumers are frustrated by what they call forced
upgrades as they're pushed into plans with coverage options they don't
Ken Davis, who manages a fast food restaurant in
Austin, Texas, is recovering from sticker shock after the small-business
policy offered by his employer was canceled for the same reasons
individual policies are being discontinued.
His company pays about $100 monthly for his basic
health plan. He said he'll now have to pay $600 monthly for a mid-tier
silver plan on the state exchange. The family policy also covers his
8-year-old son. Even though the federal government is contributing a
$500 subsidy, he said the $600 he's left to pay is too high. He's
considering the penalty.
"I feel like they're forcing me to do something that I don't want to do or need to do," Davis, 40, said.
Owners of canceled policies have a few options.
They can stay in the same plan for the same price for one more year if
they have one of the few plans that were grandfathered in. They can buy a
similar plan with upgraded benefits that meets the new standards -
likely at a significant cost increase. Or, if they make less than
$45,960 for a single adult or $94,200 for a family of four, they may
qualify for subsidies.
Just because a policy doesn't comply with the law
doesn't mean consumers will get cancellation letters. They may get
notices saying existing policies are being amended with new benefits and
will come with higher premiums. Some states, including Virginia and
Kentucky, required insurers to cancel old policies and start from
scratch instead of beefing up existing ones.
It's unclear how many individual plans are being
canceled - no one agency keeps track. But it's likely in the millions.
Insurance industry experts estimate that about 14 million people, or 5
percent of the total market for health care coverage, buy individual
policies. Most people get coverage through jobs and aren't affected.
Many states require insurers to give consumers 90
days' notice before canceling plans. That means another round of
cancellation letters will go out in March and again in May.
Experts haven't been able to predict how many will
pay more or less under the new, upgraded plans. An older policyholder
with a pre-existing condition may find that premiums go down, and some
will qualify for subsidies.
In California, about 900,000 people are expected to
lose existing plans, but about a third will be eligible for subsidies
through the state exchange, said Anne Gonzalez, a spokeswoman for the
exchange, called Covered California. Most canceled plans provided
bare-bones coverage, she said.
"They basically had plans that had gaping holes in
the coverage. They would be surprised when they get to the emergency
room or the doctor's office, some of them didn't have drug coverage or
preventive care," Gonzalez said.
About 330,000 Floridians received cancellation
notices from the state's largest insurer, Florida Blue. About 30,000
have plans that were grandfathered in. Florida insurance officials said
they're not tracking the number of canceled policies related to the new
National numbers are similar: 130,000 cancellations
in Kentucky, 140,000 in Minnesota and as many as 400,000 in Georgia,
according to officials in those states.
Cigna has sent thousands of cancellation letters to
U.S. policyholders but stressed that 99 percent have the option of
renewing their 2013 policy for one more year, company spokesman Joe
Cancellation letters are being sent only to
individuals and families who purchase their own insurance. However, most
policyholders in the individual market will receive some notice that
their coverage will change, said Dan Mendelson, president of the market
analysis firm Avalere Health.
The cancellations run counter to one of President
Barack Obama's promises about his health care overhaul: "If you like
your health care plan, you'll be able to keep your health care plan."
Philip Johnson, 47, of Boise, Idaho, was shocked
when his cancellation notice arrived last month. The gift-shop owner
said he'd spent years arranging doctors covered by his insurer for him,
his wife and their two college-age students.
After browsing the state exchange, he said he
thinks he'll end up paying lower premiums but higher deductibles. He
said the website didn't answer many of his questions, such as which
doctors take which plans.
"I was furious because I spent a lot of time and
picked a plan that all my doctors accepted," Johnson said. "Now I don't
know what doctors are going to take what. No one mentioned that for the
last three years when they talked about how this was going to work."
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