Insurers: 'Catastrophic' Healthcare Plans Change Will Cause 'Tremendous Instability'

Health insurers are responding with serious concern to the White House’s abrupt decision Thursday to allow millions of Americans whose health insurance policies have been cancelled to purchase catastrophic plans next year.

Catastrophic health plans, which generally have lower premiums and benefits associated with a major or sudden illness, had been severely restricted under Obamacare in order to lure young, healthy people into the health insurance exchanges where they would pay higher premiums and ultimately fund the health care of older and less healthy individuals.

According to the Wall Street Journal, HHS Secretary Kathleen Sebelius told a group of six senators in a letter that Americans whose policies had been cancelled because of Obamacare’s new restrictions would be permitted to purchase catastrophic plans.

Sens. Mark Warner (D-VA), Tim Kaine (D-VA), Angus King (I-ME), Mary Landrieu (D-LA), Jeanne Shaheen (D-NH), and Heidi Heitkamp (D-ND) had all urged Sebelius to permit the changes.

In response to the move, insurers have pointed out that an individual purchasing a catastrophic plan is generally healthy and will not likely incur many medical expenses in the coming year. They would prefer that these healthier Americans purchase a higher-priced policy in order to balance the risk of older and sicker Americans. From the beginning, Obamacare was intended to redistribute the payments of younger and healthier Americans to these less healthy individuals

According to the WSJ, insurers are fearful that the disastrous launch of the HealthCare.gov website has forced only sicker Americans willing to tolerate the website problems to sign up for Obamacare. Insurance companies have argued that each change in Obamacare overturns assumptions they made when they set premium prices for 2014.

“This type of last-minute change would cause tremendous instability in the marketplace and lead to further confusion and disruption for consumers,” said Robert Zirkelbach, spokesman for America’s Health Insurance Plans (AHIP), the industry’s trade group.

Zirkelbach said he had not received a copy of Sebelius’s letter to the senators and had not been informed by her of her decision.

According to the latest change by the White House, Americans who buy catastrophic coverage will be exempt from the penalty imposed on individuals who have no coverage at all, beginning in 2014. HHS states Americans who wish to take advantage of the exemption must complete an application to show that it would be more expensive for them to buy other plans in their area and must submit proof that their policy had been cancelled.

The WSJ reported that the White House said fewer than 500,000 people whose insurance coverage had been terminated and had yet to enroll in another plan could qualify for the new exemption.

The six senators who requested the latest tweak to Obamacare issued a joint statement in which they said they were “pleased that the administration appears to have responded to the concerns we’ve raised.”