Minnesota is in a growing group of states with at least partial Democratic control that have rejected President Obama’s “fix” for changed or canceled health plans — but many states still haven’t announced their intentions.
Political experts say that it makes sense that states supportive of the Affordable Care Act would reject Obama’s plan, which would allow people to keep for a year certain insurance plans that don’t meet the law’s more stringent benefits standards.
So far, the split among states has been mostly red vs. blue, but that pattern could change.
“Certainly you’re going to have the states that are moving ahead with the state-based exchanges overwhelmingly turn down the president’s offer,” University of Minnesota political science professor Larry Jacobs said.
“I’m not expecting red states to be truly rushing to put this into place. It’s a pretty complicated and precarious direction,” he said. “Some will, but I just don’t think it’s going to be sweeping.”
The move is precarious for insurers because they spent significant time and resources developing new policies to comply with the Affordable Care Act. Moving backward to changed or discontinued plans means focusing efforts elsewhere and potentially undermining the solvency of the exchange marketplaces.
A step back
For states that were supportive of the health reforms the law provides, the “fix” represents a step backward when it comes to the quality of coverage, which is a key component of the law.
Although various counts of the states don’t always agree, the latest list from the America’s Health Insurance Plans website shows 16 states allowing the fix and 15 rejecting it. No formal decision has been made yet in the other 19 states.
States listed as rejecting the fix include Arkansas, Connecticut, Delaware, Indiana, Massachusetts, Minnesota, Mississippi, Nebraska, New York, Oklahoma, Rhode Island, Vermont, Virginia, Washington and West Virginia. (Indiana, Mississippi and Oklahoma, which are controlled by Republicans, are political outliers. Arkansas has divided government.)
States listed as accepting include Florida, Hawaii, Illinois, Kentucky, Maryland, Michigan, Missouri, New Hampshire, North Carolina, North Dakota, Ohio, Oregon, Pennsylvania, South Carolina, Tennessee and Wisconsin. (Kentucky, Hawaii, Illinois, Maryland and Oregon are political outliers on that list.)
Dayton said ‘fix’ too difficult
Gov. Mark Dayton decided it would be too difficult for insurers to implement the fix and that it could make coverage in Minnesota more expensive, he wrote in a letter to a health insurance trade group last week.
Unlike Minnesota, Kentucky’s insurance regulator chose to allow consumers to purchase discontinued plans if the insurance companies decided to offer them once again. Kentucky also allowed “early renewals,” where consumers could already keep their existing coverage into 2014.
The Kynect exchange in Kentucky has been applauded as a national success story for enrolling consumers, and officials there have been aggressive in signing up people for coverage.
Maggie Woods, director of the Health and Life Division of the Kentucky Department of Insurance, said the state is allowing rate and form adjustments from insurers who choose to offer discontinued policies until Dec. 15.
The insurers can use unapproved rates the day that they’re filed under existing state law, Woods said, with a review process likely later. Companies have the opportunity to raise rates, but the insurance regulator said it was unclear what the new prices would be because they haven’t been filed.
The state can change rates or disallow them after they’re filed, but “It’s not a common occurrence,” Woods said.
“If they can do it, great,” she said of the fix. “That’s why we left it up to the insurers to make the decision.”
If Kentucky and other states can implement the fix, why can’t Minnesota?
“State laws,” Eileen Smith, a spokeswoman for the Minnesota Council of Health Plans, a trade group, said in an interview.
“State laws and rules made the timing impossible to file all the new plans and get them approved, in short,” she said. “If there would have been a way to do this, the plans would have done it, because they want to keep their enrollees happy.”
Smith said if Obama had offered the fix in May or June, it would have been a different story.
Commerce, health plans differ on reason
However, Minnesota’s Commerce Department, which regulates insurance, offered a different explanation when asked about the feasibility of implementing the fix.
“There really would not have been a regulatory feasibility issue; the decision was based on the health plans themselves, who stated that the president’s transitional policy would be unworkable, and would likely cause more expensive health coverage in Minnesota,” Anne O’Connor, a Commerce Department spokeswoman, wrote in an email. “Under Minnesota Statutes … the Department of Commerce has the authority to expedite the rate filing process.”
Some political observers say Obama’s decision was little more than him buckling under political pressure and attempting to shift attention elsewhere.
“You’re being caught in a game of hot potato,” Jacobs said. “President Obama had this hot potato sitting right in his lap and he wanted to get it off of him. So he tosses it to the states and the insurers in the states. And they’re taking it back and forth. No one wants to be kind of the bad guy that says to individuals … we’re going to take your old policies from you.”
But, he added, it’s apples and oranges to compare states like Minnesota to some of the red states moving forward with the fix. “Most of those states … do not have a very robust regulatory framework in terms of insurers,” he said.
“This was a … political move,” Jacobs said. “The president was using insurers and state regulators as a fall guy for his screw-up. He’d made that outlandish promise that individuals could keep their insurance that has not proven to be the case for some people, and he was trying to change the conversation.”
The politics of the decision, though, also are complicated by the delay’s potential impact on the financial outlook of insurance companies.
How big a problem could the Obama “fix” cause?
Some believe it could jeopardize the operation of some health exchanges, which had hoped to improve their risk pool by enrolling many of the healthier folks who were likely to have had the substandard plans.
Seth Chandler, a law professor and insurance expert at the University of Houston, said the impact could be enormous.
He said some states — such as Minnesota, California or New York — will likely see their exchanges work.
Extra pressure on some exchanges
But in states like Texas, where enthusiasm for Obamacare isn’t there, exchanges might start to fail, he said — especially with the added pressures of low exchange enrollment that would be compounded by the fix.
“It is likely that there will be states in which the exchanges – they may not collapse entirely,” Chandler said. “But they are going to be under huge strains, and insurers are going to feel either pressure to exit the exchanges, since there’s nothing that forces them to be there, or to raise prices substantially, and that’s going to exacerbate the problems they’re already facing.”
Jacobs, however, doesn’t expect catastrophic scenarios because there are so many barriers to keeping old plans: Not only do state regulators have to OK that move, but health carriers have to reinstate the obsolete insurance and consumers have to choose to re-purchase it, forgoing the financial incentives of the exchanges.
Norm Ornstein, a political scientist at the American Enterprise Institute think tank in Washington, said the problems may be manageable.
If insurance companies and the exchanges could begin signing up healthy people, especially as the technology behind the exchanges is improved, “the problems that could emerge from this executive action could be minimized,” he said. “But that’s all a big if.”
Although there is no official deadline for states, they will need to decide soon in order to meet the Jan. 1 mandate.
“Obviously, this is going to have to take place pretty fast,” Chandler said.