The Obama administration will let people with health insurance plans that don't comply with Affordable Care Act standards keep them through October 2017 if their states allow it, officials said Wednesday in announcing a series of final Obamacare rules.
The administration also extended Obamacare's open enrollment for next year by a month—it now will run from Nov. 15, 2014, until Feb. 15, 2015. And it is giving insurers additional financial help to offset the costs of benefits claims from new ACA enrollees, with the goal of keeping Obamacare premiums "affordable" in coming years, officials said.
New rules also simplified the paperwork that larger employers will have to file when the the mandate obliging them to offer affordable health insurance to workers begins next year.
And the rules gave a financial break to the types of self-insured health plans run by many unions, excluding them for two years from the $63-per-capita "reinsurance contribution" assessed for each enrollee.
The final rules, which officials said are being announced now to give individuals, employers and insurers time to plan for 2015, come weeks before the March 31 deadline for open enrollment in Obamacare plans. So far, about 4 million people have bought private insurance plans sold on government-run exchanges and an unknown number have bought ACA-compliant plans outside the exchanges.
Senior administration officials said there are up to 1.5 million people who now have health insurance through individual or small-group plans that aren't compliant with Obamacare minimum standards, and who are now potentially eligible for the extension announced Wednesday.
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The fix lengthens an extension first announced in late 2013, in the midst of the troubled launch of Obamacare. At that time, the government had said that people who had bought noncompliant plans in 2013, would now be able to keep them through 2014.
Without that step, the plans would have become illegal in 2014, but the severe tech problems of the federal Obamacare website and some state-run sites had made it effectively impossible for many people to shop for and buy insurance to replace their old plans.
After the first extension was announced, about half of the states allowed their residents to keep noncompliant plans, which the administration had earlier blasted as "junk insurance" that did not protect many of their users from serious financial fallout from medical expenses.
That tamped down, somewhat, outrage among critics who claimed President Barack Obama had lied while promoting his signature health-care reform law, when he had told people they could keep their insurance plans if they wanted under the ACA. But it also increased the risk that insurers selling new Obamacare plans would have fewer healthier enrollees to balance out the cost of giving benefits to sicker enrollees.
Under the new rule, people who maintain those plans, and who renew them as late as Oct. 1, 2016, will be able to keep them until as late as 2017. The administration Wednesday emphasized that the extension now includes people in the small-group market, whose employers will start becoming subject to Obamacare's mandates in 2015. The administration said it would be up to individual states to allow the extension, and whether to include both individuals and small group members in the waiver or just one category.
The extension could give political relief to Democrats, particularly in vulnerable legislative districts, who face criticism about the effects of Obamacare on their constituents. It also effectively delays until after the 2016 presidential election the requirement that nearly all Americans have health insurance that complies with ACA minimum standards. Most people who do not have health insurance by this year face a tax penalty in 2015 equal to up to 1 percent of their adjusted gross income.
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Officials who briefed reporters on the extension pooh-poohed a question about whether politics played a role in the extension decision.
"The motivation here is really to implement the law in the way it should be implemented," one official said, speaking on the condition he not be identified.
The official also noted the number of people potentially eligible for the extension is a "small fraction of the entire population."
Another official said, "no new customers can come into these policies."
Because of the historical turnover of people in individual insurance plans as well as the chance to get government subsidies to buy Obamacare policies on government-run exchanges, officials expect there will be a relatively small number of people who will be in noncompliant plans by the new October 2016 sign-up deadline.
U.S. Senate Minority Leader Mitch McConnell, R-Ky., said the extension was clearly done to protect Obama's fellow Democrats.
"The Obama administration's announcement today that it will continue to allow insurers to sell health care plans that don't meet Obamacare minimum coverage requirements is not only another reminder of the President's broken promise that you can keep your plan if you like it, but represents a desperate move to protect vulnerable Democrats in national elections later this year," McConnell said.
"By announcing a new delay in requiring that policies meet minimum coverage standards, the administration avoids a new round of health policy cancellations set to hit shortly before the November elections," McConnell said.
"What makes this latest delay so troubling is the fact that it was prompted not by the heartbreaking stories of millions of Americans but by the private pleadings of a handful of endangered Democrats. Americans have become increasingly aware of the fact Obamacare is broken beyond repair. The only 'fix' is full repeal followed by step-by-step, patient-centered reforms that drive down costs and that Americans actually want."
In extending open enrollment next year from two months as originally envisioned to three months, the administration was responding to tax experts and others who had said enrollment in Obamacare could be hampered for 2015 by insisting that people enroll in plans at the height of the holiday season, when they are strapped for cash.
The additional month, until Feb. 15, 2015, coincides with the start of tax season, when most people are expecting a refund on their income taxes.
Brian Haile, who heads Jackson Hewitt Tax Service's health-care reform initiatives, noted that up to 80 percent of people get a refund each year, with the average refund being $3,000 per family.
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That is "the largest 'paycheck' that many such families receive all year, and it serves as a critical injection of liquidity to most households," Haile said. "Consumers flush with their refunds are much more likely to avail themselves of the health insurance on offer through the marketplaces."
—By CNBC's Dan Mangan. Follow him on Twitter @_DanMangan