WASHINGTON – Warding off the specter of election-year health insurance cancellations, the Obama administration Wednesday announced a two-year extension for individual policies that don’t meet requirements of the new health care law.
The decision helps defuse a political problem for Democrats in tough re-election battles this fall, especially for senators who in 2010 stood with President Obama and voted to pass his health overhaul.
The extension was part of a major package of regulations that sets ground rules for 2015, the second year of government-subsidized health insurance markets under Obama’s law — and the first year that larger employers will face a requirement to provide coverage.
Hundreds of pages of provisions affecting insurers, employers and consumers were issued by the Treasury Department and the Department of Health and Human Services. It will likely take days for lawyers and consultants to fully assess the implications.
The cancellation last fall of at least 4.7 million individual policies was one of the most damaging issues in the transition to a new insurance system under Obama’s law. The wave of cancellations hit around the time that the new healthcare.gov website was overwhelmed with technical problems that kept many consumers from signing up for coverage. It contradicted Obama’s promise that you can keep your insurance plan if you like it.
The latest extension would be valid for policies issued up to Oct. 1, 2016, which means those plans would be in effect well into 2017. It builds on an earlier reprieve issued by the White House.
It’s not clear how many people will be affected by the most closely watched provision of the new regulations, the two-year extension on policies that were previously subject to cancellation. The administration cites a congressional estimate of 1.5 million people, counting those in individual plans and small-business policies.
About half the states have allowed insurance companies to extend canceled policies for a year under the original White House reprieve. The policies usually provided less financial protection and narrower benefits than the coverage required under the law. Nonetheless, the skimpier insurance was acceptable to many consumers because it generally cost less.
The impact in Minnesota is unclear. State insurance companies convinced Gov. Mark Dayton in November that allowing consumers to keep their old policies would be unworkable, and so the state declined to grant the extension at that time.
The National Association of Insurance Commissioners, which represents state regulators, was skeptical of the two-year extension.
“Creating two tiers of plans — the compliant and noncompliant — could result in higher premiums overall and market disruptions in 2015 and beyond,” said NAIC President Adam Hamm, who is North Dakota’s insurance commissioner. Although Hamm is a Republican, the organization is nonpartisan.
Staff writer Jackie Crosby contributed to this report.