Last week, Health and Human Services (HHS) Secretary Kathleen Sebelius and Centers on Medicare and Medicaid (CMS) Administrator Marilyn Tavenner testified before the relevant House Committees on implementation problems with the Affordable Care Act (ACA) and this week the Senate Committees will hold hearings. In addition to the website problems, the Administration is likely to be asked about people who are receiving cancellation notices from their health insurance providers. It is important to understand some of the background information about why people might be getting these notices. Under current law, health insurance plans sold to individuals (as opposed to employers providing health insurance) are often sold in 12 month contracts at the end of which the insurance company has the option to discontinue or change the policy by raising premiums, increasing cost-sharing or limiting benefits. If they discontinue the policy they must provide 90-day notice, must offer the policyholder another new policy as an alternative and they must treat every policy holder the same. This has not been changed by the ACA. About 5% of the population receives coverage in the individual insurance market. It is not known how many people are receiving these notices.
What the ACA has changed is that new health insurance plans sold in the individual market must meet new consumer protections such as not raising premiums based on the policy holder’s health status, not excluding coverage for pre-existing conditions and providing a minimum level of benefits. Health insurance plans that do meet these new consumer protections cannot be sold. The intent of these changes is to fix the current problems in the individual insurance market where sick people are charged more or provided very limited health services. The goal of spreading the risk between the healthy and the sick is to try to make it more like employer sponsored insurance where everyone pays the same premium and the healthier people balance out the cost of people with more health needs. It is estimated that most people purchasing health insurance coverage through the marketplaces will be eligible for premium tax credits and other subsidies to make it more affordable. People who make less than 400% of the federal poverty line are eligible for help ($45,960 for an individual or $94,200 for a family of four).