Why Insurers Cancel Policies, And What You Can Do When It Happens

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By Julie Appleby
Wed, Oct 30 2013
News that health insurers are ending the policies of what could be millions of Americans has rattled consumers and added to the debate over the health care law.
If you or a family member has been notified that your individual policy is being cancelled at year’s end, you may be stunned and upset.
House Republicans sparred with Health and Human Services Secretary Kathleen Sebelius Wednesday over the cancellations, with Sebelius saying the law generally didn’t require insurers to discontinue plans if they were in effect at the time of the law’s enactment in March 2010.
No one knows how many of the estimated 14 million people who buy their own insurance are getting such notices, but the numbers are substantial. Some insurers report discontinuing 20 percent of their individual business, while other insurers have notified up to 80 percent of policyholders that they will have to change plans.
Here is a guide to help you understand the bigger picture, including why your premiums and benefits are likely to change next year and what you should consider as you shop for a new policy.
Q. Why is this happening?
A. The so-called individual market was targeted by the health care law because it didn’t work well for many people who do not get coverage through an employer, particularly those who were older or had health problems. The latter were often rejected for coverage, charged more or had their conditions excluded from coverage.* Some policies were so skimpy they provided only the barest of coverage when someone did fall ill.
Starting Jan. 1, insurers can no longer reject people who are sick or charge them more than the healthy under the Affordable Care Act. They must also beef up policies to meet minimum standards and add benefits, such as prescription drug coverage, maternity care and mental health services.
Q. Why am I getting this notice?
A. Most likely your plan didn’t meet all the standards of the federal health law.* One type of policy being discontinued by Florida Blue, for example, did not cover hospitalizations or emergency room visits and paid a maximum of $50 toward doctor visits.* It’s possible your plan also had deductibles and other potential expenses - such as copayments for doctors and hospital care -- that exceeded the law’s annual out-of-pocket maximum of $6,350 for individuals or $12,700 for families. Insurers may have just decided to end certain types of policies, something they have always had the ability to do. Some policies that fail to meet the law’s standards can still be sold, but only if the insurer decides to continue them and they are “grandfathered,†meaning you purchased one before March 2010 and neither you nor the insurer has made any substantial change since then.* Adjusting an annual deductible, which many people do each year to keep down their premiums, is a change that could end grandfathered status.