AHIP Explains Health Plan Cancellations Under PPACA

Many health insurers are cancelling individual insurance plans because the policies aren't "grandfathered" and don't meet PPACA requirements, according to the trade group America's Health Insurance Plans.

AHIP has issued a memo to reporters providing information on the reform law's grandfathering provision in response to the flurry of coverage surrounding plan cancellations. Most policies in the individual market aren't grandfathered, meaning they went into effect after the PPACA became law in March 2010. Furthermore, HHS has specified plans that underwent changes after March 2010 such as having an annual dollar limit on benefits imposed aren't considered grandfathered, even if they were in effect before the PPACA was signed.

"The primary reason most policies are not grandfathered today is because people chose to change their policies or purchased new coverage after the law was enacted," AHIP wrote in the memo.

HHS has reported between 40 and 67 percent of policies are in effect for less than a year, according to AHIP.

Those non-grandfathered policies must meet new coverage requirements under the law, according to the memo. Under the PPACA, individual health plans must cover "essential benefits" such as prescription drugs, mental health services and maternity care. Insurers must also cap consumers' annual expenses.

Many insurers are discontinuing plans that don't meet the reform law's standards. Various companies are dropping plans that cover sizeable chunks of their individual markets. Florida Blue is ending about 300,000 policies, 80 percent of its individual policies in the state. Kaiser Permanente in California has sent cancellation notices to approximately 160,000 people who make up half of its individual business in the state.

In response to the cancellations, Republicans have criticized President Barack Obama for not keeping his promise that people could keep their current health insurance plans under the PPACA. During a speech in Boston this week, the president revised his promise, stating the "vast majority" of people — but not everyone — will be able to keep their old health insurance coverage. He said relatively few people will be forced off their plans and accused his detractors of "grossly misleading" the public.

White House officials have said people who lose their coverage can purchase better plans through the health insurance exchanges. Although the new plans might cost more than previous coverage, the higher premiums will be offset by subsidies available to many people purchasing plans through the exchanges.

More Articles on Health Insurance Coverage:
Obama Revises Promise: "Vast Majority," But Not All, Can Keep Health Plans
White House Under Fire as Insurers Cancel Plans Under PPACA
Health Insurers Cancel Thousands of Individual Policies Under PPACA