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If You Like Your Plan, Maybe You Can Keep It a Little Longer

In a move designed to avoid further rate shock, the Obama administration is considering a possible extension of the one year grace period on previously cancelled health insurance plans.

The AP reports word of the possible extension came from Aetna's Chief Finanical Officer and also from the CEO of Avalere, a health insurance consulting firm. An HHS spokesperson confirmed the change was under discussion. The extension, if it happens at all, could be for as little as one year or for as long as three.

The decision to allow a one year extension of cancelled plans was made last November after President Obama took a hit in the polls for betraying his oft-repeated promised "If you like your plan you can keep it." At the time, millions of policies had been cancelled (the AP puts the number at 4.7 million) and many consumers faced new policies with higher premiums, higher deductibles and a smaller network of providers. This combined with a website that didn't function made for a very difficult situation.

So on November 14th President Obama announced that insurers could extend cancelled plans if state insurance commissioners agreed to allow it. A CMS letter announcing a subsequent change made clear the extension was made because "some consumers were finding other coverage options to be more expensive than their cancelled plans or policies." In other words, rate shock.

The potential new extension seems to have the same goal, i.e. damping down stories of rate shock. Insurers are set to announce rates for 2015 in May. That doesn't give them much time to determine how the new risk pool is shaking out. The AP notes "insurers may lean toward higher rate increases in 2015, to make sure they collect enough money in case medical claims come in higher than expected."

A significant rate increase in May would be another serious political hit for Democrats in this year's midterm elections. In addition, the bad publicity would make it more difficult for the Obama administration to lure in the "young invincibles" needed to balance the risk pool going forward. So for both political and policy reasons, the administration wants to do what it can to keep rates stable.


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