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Obamacare 'fix' creates new headaches, say insurers and regulators

Caroline Humer and Lewis Krauskopf
Thursday, 14 Nov 2013 | 5:17 PM ET

NEW YORK, Nov 14 (Reuters) - Insurers and state regulators say they fear that President Barack Obama's "fix" for policies canceled under his healthcare reform law could create new problems and lead to an increase in premiums.

Facing pressure by lawmakers from his Democratic Party, Obama said on Thursday that insurers could extend by a year policies that were due to be canceled in 2014 because they do not comply with higher standards of benefits and other requirements under the 2010 law, commonly called Obamacare.

The change will allow policies that start between Jan. 1 and Oct. 1, 2014 to be renewed, meaning they will continue well into 2015.

Insurance industry officials say that allowing several million Americans to hold onto such policies, which may be cheaper because they offer fewer benefits, could keep more young and healthy consumers out of new state insurance markets created by the law, Obama's signature domestic policy achievement.

The new markets would then have a higher proportion of sicker beneficiaries who cost more to insure and could lead to insurers raising their prices to stave off any losses.

The business risk adds to the logistical nightmare of reissuing plans that had already been canceled. In addition, some states had barred insurers from selling any of their existing plans in 2014.

Aetna Inc, the third-largest U.S. insurer, said it was willing to make the effort.

"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," Aetna spokeswoman Cynthia Michener said in a statement.

"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," she said.

But others may not be inclined, or able, to help Obama make good on his proposal to fix this part of the problem-plagued rollout of the Patient Protection and Affordable Care Act, which was intended to provide millions of uninsured Americans with affordable coverage.

"That puts a huge premium on insurers having an army of people they really don't have to explain this new complicated thing that nobody ever imagined was going to happen," said Joseph Antos, a health policy expert at the American Enterprise Institute.

WHO TAKES THE RISK?

Insurers said through their industry trade group, America's Health Insurance Plans, they were looking for additional measures from the administration to help them offset the new risks posed by Obama's plan.

"Changing the rules after health plans have already met the requirements of the law could destabilize the market and result in higher premiums," AHIP President Karen Ignagni said in a statement.

The government has not provided details but said on Thursday that it would use a risk adjustment pool created in the law to help offset the costs that could come as the mix of participants changes.

State insurance commissioners, who regulate the market, said they were also concerned about the President's decision.

"It is unclear how, as a practical matter, the changes proposed today by the President can be put into effect," the National Association of Insurance Commissioners President and Louisiana Insurance Commissioner Jim Donelon said in a statement. "Changing the rules through administrative action at this late date creates uncertainty and may not address the underlying issues."

The Washington state insurance commissioner Mike Kreidler said in a statement that he had "serious concerns" about Obama's proposal and will not allow insurers to extend individual policies.

MIT health economist Jonathan Gruber, who helped design the healthcare law, said its authors had expected 6 million people in the individual market would lose their plans in 2014 and that insurers had made drastic changes based on the belief they would have access to those members.

"Insurers have every right to be upset today," Gruber said in an interview on CNN.

One insurance industry analyst said Obama's move also puts the insurers in the awkward position of making the fix work or bear the political pressure from unhappy customers if they can't.

"Cynically, the move by the White House effectively makes the plans look like the scapegoats if they terminate a current offering," said Chris Rigg, an analyst for Susquehanna Financial Group.

(Additional reporting by David Morgan in Washington; Editing by Michele Gershberg and Grant McCool)