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Insurance industry: Obama's change could destabilize industry, result in premium increases for all

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President Obama addresses the press regarding the Affordable care Act on Nov. 14, 2013.
President Obama addresses the press regarding the Affordable care Act on Nov. 14, 2013. - (Whitehouse.gov)

By Beth Fitzgerald | Twitter | Facebook

President Obama's announcement on Thursday that people should, in fact, be able to keep their existing insurance policies if they like them is good news for the millions who recently received cancellation notices – but not such a good thing for insurance companies still struggling to implement the law.

And it could result in higher premiums for everyone.

"Changing the rules after health plans have already met the requirements of the law could destabilize the market and result in higher premiums for consumers," said Karen Ignagni, chief executive of America's Health Insurance Plans (AHIP) – the national trade group for the industry.

"Premiums have already been set for next year based on an assumption of when consumers will be transitioning to the new marketplace," she said. "If now fewer younger and healthier people choose to purchase coverage in the exchange, premiums will increase and there will be fewer choices for consumers. Additional steps must be taken to stabilize the marketplace and mitigate the adverse impact on consumers."

David Knowlton, president of the New Jersey Health Care Quality Institute, isn't sure the fix will be that easy.

He pointed out that health insurance is still regulated by the state of New Jersey, and it remains to be seen how the state will deal with Obama's decision to let people keep their old insurance policies.

New Jersey's B&E plans have lower premiums than standard plans and they don't comply with the ACA, but Knowlton said the federal government gave New Jersey a waiver so insurers could offer B&E plans until the new ACA policies kicked in.

Knowlton said Obama may not be able to unilaterally "instruct the state of New Jersey to allow people to keep a plan they had before that is by the wayside now. You can keep the B&E alive beyond the waiver if New Jersey agrees, and there may be some push back from the health plans."

Knowlton said perhaps Obama should have invited the states "to apply for a waiver if they felt that they were disadvantaged by Obamacare."

"I think what the president did was necessary, but it wasn't done carefully," he said. "What he gave was a political solution, not a policy solution. And the policy solution would have been a little more nuanced and had more limits on it."

Joel Cantor, director of the Center for State Health Policy at Rutgers, said Obama's action will have short-term and long-term consequences. And again hinted at a raise in rates.

"The up side is that this change will give people more time to review their options," he said. "The down side may be that the risk pool will be more fragmented, with more comparatively healthy people staying outside the new marketplace."

And if fewer healthy people enter the marketplace, premiums only figure to go up.

Which is bad news for New Jersey business owners, according to Kevin Kuhlman, manager of legislative affairs for the National Federation of Independent Business.

"The president's administrative 'fix' does not address in any real way the root of the health insurance conundrum for small-business owners: skyrocketing costs," he said. "In fact, it's likely to keep costs high. The proposal is really just a temporary bid that may delay immediate pain but will not solve structural problems."

It's unclear how much the reversal will impact New Jersey insurance companies, but a spokesman for Aetna said the logistical process of renewing policies that had been cancelled will be an issue.

"We support efforts to allow people to keep what they have, however, we will need cooperation and expedited approval from state regulators to remove barriers that would make it difficult to make this change in such a short period of time," spokesperson Susan Millerick said. "State regulators will need to allow us to update our policies and secure appropriate rates so we can get these plans back in the market."

Tom Vincz, spokesman for Horizon Blue Cross Blue Shield of New Jersey, said the company – New Jersey's largest insurer – is now quickly racing to understand what it all means.

"President Obama just made the announcement and we have to evaluate how this might be accomplished in such a short period of time," he said. "We will also need to understand how the New Jersey Department of Banking and Insurance will want us to proceed."

Health Republic Insurance of New Jersey, a new insurance company created specifically under the ACA, could be impacted greatly as it only offers plans that comply with the ACA. If New Jerseyans keep their old policies, that arguably reduces the potential pool of customers HRINJ could enroll.

The company is hoping it will draw from the far larger pool of uninsured New Jerseyans that HRINJ and the state's other health insurers are competing for.

Cynthia Jay, spokeswoman for HRINJ, said, "We still encourage people to examine the options on the Health Insurance Marketplace to understand what plan may be best for them. They need to consider the new, comprehensive benefits, network access, and affordability. The plan options through the ACA provide coverage for essential health benefits everyone should have, while the basic individual policies in the state they may be keeping don't. Individuals have choices now and these choices were developed to positively impact millions."

Experts predict several hundred thousand New Jerseyans will enroll in health plans on the ACA Marketplace, where many will receive generous federal subsidies that significantly lower their premiums.

Of course, enrollment predictions have been way off target – one of the many reasons Obama was forced to reverse course this afternoon.

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Beth Fitzgerald

Beth Fitzgerald

Beth Fitzgerald reports on health care, small business and higher education. She joined NJBIZ in 2008 after a 34-year career at the Star-Ledger and has been reporting on business in New Jersey since 1978. Her email is beth@njbiz.com and she is @bethfitzgerald8 on Twitter.

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