The pictured quote was part of a weekly address from President Obama in August 2009.
One of the most confusing parts of the Patient Protection and Affordable Care Act (PPACA) is the notion of a “direct from Washington D.C.” definition of health insurance called an “ACA Compliant Health Plan.”
Before 2010, the actual definition of what constituted a valid individual or small group health insurance policy was a local thing. That is, in Louisiana, the Department of Insurance, in conjunction with the Legislature, told insurance companies what they had to cover and how they had to price these policies. The standard in health insurance was Iocal – local decisions and local products to meet local needs.
Enter the healthcare reform law, passed on March 23, 2010. One of the key features of the law was to take all of this local authority and pull it back to Washington D.C., then distribute it to the federal Department of Health and Human Services (HHS).
Since HHS wasn’t set up to regulate insurance and unify these definitions across all 50 states, they had to create yet ANOTHER federal agency called the Center for Consumer Information and Insurance Oversight. (No, I am NOT making this up.) This group, often called CCIIO (pronounced SEE-cy-OH), sets and enforces the standards for this national definition of health insurance among all 50 states.
CCIIO did this by building a national reporting system, called the Health Information and Oversight System (HIOS – say HIGH-ohs) and ordering all insurance companies in the U.S. to enter the details of every health insurance policy they sold in the small group and individual markets into this tool every year. Coverage, prices, everything!
Why am I bothering you with this? Because this process accidentally divided the insurance marketplace in Louisiana for individual and small group coverage into three distinct groups of products with VERY different coverage and prices:
- Policies already in effect on 3/23/2010 — were considered “grandfathered” coverage, and, as long as they are maintained with very minimal changes, can continue into the future with no hard expiration date. Grandfathered plans are essentially the original “state designed” version of health insurance from the pre-healthcare reform days. Many thousands of Louisianans hold and jealously guard their grandfathered plans.
- Policies purchased AFTER 3/23/2010 but BEFORE 1/1/14 — were considered “like it, keep it” plans (sometimes called “grand-mothered” plans) because the president said before the healthcare reform law was passed that no one would have to give up existing health insurance. That turned out not to be reflected in the Act.
These plans were priced the same way grandfathered plans were priced, but contained some new protections for consumers. The good news is that consumers have been allowed to keep these plans beyond 1/1/14 even though the law said they couldn’t. The bad news is that by 1/1/16, consumers must let them go. CCIIO considers them “junk” insurance, not worthy of your ownership even if you have been happy with them for years, and has not allowed any new sales for more than two years now.
- Policies purchased since 1/1/14 — are considered full-blown, federally approved healthcare reform law-compliant plans. You may hear them called “Qualified Health Plans” every now and then. They cover a lot more stuff than No. 1 or No. 2 above and are regulated directly by CCIIO via HIOS (You got that?). As you might expect, more coverage and more Washington involvement means higher prices.
Since we knew that time was short on the “grandmothered” plans, we have been communicating with about 18,000 of our policyholders so they would know that Blue Cross has to shut their plans off on 1/1/16 and give them a chance to pick out a brand new, shiny, straight-from-Washington health plan
Consumers loved the flexibility of the No. 1 and No. 2 plans because you could buy as much coverage as you wanted. Just want to cover hospital bills? No problem. Want to add a few doctor visits? Done. Don’t want to buy maternity coverage? Always an option in No. 1 and No. 2 above. This allowed consumers more power and flexibility, and the ability to buy insurance based on their own tolerance of risk.
In No. 3 plans, not so much. Washington’s notion of health insurance dictates that every product comes fully loaded; every product covers every imaginable medical service, many with no cost sharing at all. While it might seem odd that a middle-aged man or an elderly woman might have to buy coverage for birth control or pregnancy, it’s in there. Sadly, such lavish coverage comes at a very high price.
The No. 2 customers, whose plans are discontinued, are mostly unhappy with their choices. The No. 3 plans are often DOUBLE the price of the No. 2 plans they had. Not only is the coverage much richer, but the population of folks buying it is not very diverse, tends to skew older and have more health conditions then the original coverage. This combination is threatening to destabilize the No. 3 pools.
So, to sum up: More regulations lead to a fracturing of the individual and small group markets into three types of health insurance. The newest type is by far the most expensive, and, as customers are forced to migrate to the newer products, their costs are going up and their ability to manage their own risk is going down, sometimes dramatically. And even though many folks were told “if you like it, you can keep it,” the reality has turned out to be “not so much.”