Moda, Premera take different approaches to Affordable Care Act for 2015

Sept. 20--Moda Health, one of two insurance companies participating in Alaska's federally run online marketplace, says it will cancel individual policies that do not comply with the Affordable Care Act, a decision that will affect about 800 Alaskans.

The affected policyholders should receive a letter about the cancelation for 2015 by early October, according to Jason Gootee, Moda Health's regional manager for Alaska.

Premera Blue Cross Blue Shield, the other insurance company on the online marketplace, has taken a different approach and will allow its members to hang onto their individual policies -- at least for a while -- even though those policies do not comply with the standards laid out in the health care law, said Melanie Coon, a Premera spokesperson.

Both moves by the insurance companies are legal under the Affordable Care Act.

Here is an overview:

Why is this happening now?

The rollout of HealthCare.gov -- the website set up to get people enrolled in insurance -- didn't go well. Glitches riddled the online marketplace and just six Americans managed to immediately sign up when it opened Oct. 1, 2013.

Originally, the plan was that uninsured people would have six months to buy health insurance. This insurance would meet new, non-negotiable standards laid out in the Affordable Care Act. People with pre-existing conditions could no longer be denied coverage. All polices would cover what the law defines as "10 essential health benefits" including preventive care, maternity and newborn care, and behavioral health treatment.

In addition, in 2014 all consumers who 1) had insurance that did not meet the new standards and 2) acquired that insurance after the Affordable Care Act became law in 2010 would see their old noncompliant policies disappear.

But then President Barack Obama, receiving heavy criticism for the botched rollout of the online marketplace, announced extensions. First, the Obama administration said in November that people could keep their old policies through September 2014. Five months later, Obama extended that by two years, through 2016.

What made things trickier is that the decision to keep to-be-canceled policies was ultimately left up to individual state insurance commissioners. (Alaska said yes to the new rules, but about half of state commissioners chose not to renew canceled plans.) Then the question became: Would the insurance companies play along?

What did the insurance companies say?

Moda Health recently said "no." It declared its decision in rate filings with the state of Alaska earlier this year, said Lori Wing-Heier, director of Alaska'sDivision of Insurance.

"To be honest, when we accepted the extended transition we did not know how insurers would react," she said. "But it was kind of a surprise to us that Moda elected to not stay with the plan."

Gootee said Moda will terminate all noncompliant policies on Dec. 31, 2014, in the three states where it operates: Alaska, Oregon and Washington. It will send letters notifying consumers by the beginning of October, in line with HIPAA -- a federal health law that mandates, among many other things, that insurers provide 90 days' notice before canceling a product.

The letter will list one of Moda's new plans offered on the health insurance marketplace that most closely matches the consumer's old noncompliant plan. If the customer chooses to do nothing by Jan. 1, he or she will automatically be enrolled in the new plan, which will likely have a higher premium than the old one, Gootee said.

However, households may be eligible for a federal subsidy on their new premiums if they make between 100 percent and 400 percent of the federal poverty level. For a family of four in Alaska, that represents an income of $29,440 to $117,760.

To capture this discount, the individual or family must go to HealthCare.gov to check eligibility and enroll in health insurance through the website. This year, open enrollment goes from Nov. 15 to Feb. 15.

Gootee said that if a household decides to enroll in a plan through the online marketplace it must notify Moda of the change.

On the other hand, Premera -- the largest health insurer in Alaska -- has said it will allow its members to renew their 2013 plans through 2016. This affects about 3,200 Alaskans who purchased insurance through Premera after the Affordable Care Act became law on March 23, 2010, but before the health insurance marketplace opened on Oct. 1, 2013, Coon said.

Last fall, Premera sent out cancelation notices to this subsection of customers but retracted them once Obama announced the extension on old policies.

Premera also has another group of customers who signed up for insurance before the Affordable Care Act became law. These 2,760 Alaskans can continue to renew their old plans for as long as Premera offers them, Coon said.

Why are the insurers' decisions different?

Basically, it comes down to cost and size of customer base.

Jonathan Nicholas, a spokesperson for Moda, wrote in an email that Obama's extension for old policies created a divided risk pool for the company this year.

There are people who are enrolled in compliant health plans and people who are not. Moda has chosen to focus on just one pool moving forward to create "more stability in these individual markets," he wrote.

Wing-Heier called it a "business decision."

"They are pretty set in their beliefs that they can do better service for their consumers by offering one service to the consumer instead of offering compliant and noncompliant plans," she said.

Coon said Premera has "a different view."

She wrote in an email that regardless of whether Alaskans are enrolled in new or old plans, the state's individual market isn't large enough to spread out the costs of people with high medical bills to keep premiums down.

"We believe it's important instead to give consumers more choices, including keeping plans that may be more affordable than those under the ACA," Coon wrote.

Premera has said that in the first six months of 2014, it received more than $7 million in medical claims from 33 Alaska members enrolled in individual policies through the health care law.

What about the premiums?

Despite taking different routes, both companies recently announced hefty insurance rate increases in 2015 for Alaskans who purchased individual plans under the health care law. Premera rates will increase between 35 and 40 percent, while Moda plans will go up by 22 to 28.8 percent, according to Wing-Heier.

The rate hike will hit hardest those people not eligible for a federal subsidy.

Wing-Heier has said 2015's increases are due to the small number of Alaskans on the individual market.

The new health plans also cover mandatory health benefits that people may have previously opted out of, she said.

"Pre-ACA, some people went for catastrophic coverage. They went for very large deductibles and high-cost medical hospital stays," she said. "Now they're buying medical and pharmaceutical and pediatric care that they may not have chosen (before)."

Coon said customers signing up for Premera policies on the health insurance marketplace have, in general, opted for higher premiums and lower deductibles.

The company's most popular plan before the health care law had a deductible of $7,500. In the marketplace, the most frequently purchased plans have a deductible of $2,000 or $3,000.

As of September, Premera had roughly 5,100 members with health insurance through the online marketplace and 2,000 who purchased plans outside the marketplace.

About 8,000 Alaskans have signed up with Moda under the health care law, about 90 percent of those through the online marketplace.

Aren't there other health insurance companies in Alaska?

Yes, there are. Aetna, Assurant Health Insurance and Celtic Insurance Company offer plans in Alaska, but off of the federally run online marketplace.

Still, they must meet the new insurance standards. Wing-Heier said all three companies have opted out of the extended transition period offered by Obama. As policyholders' old plans expire in 2014, they will be transitioned into plans rewritten to comply with the health care law.

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