Options to bridge gap caused by Obamacare cancellation of health insurance policies

There’s been some news coverage of late over millions of Americans who are receiving letters from their health insurance companies explaining that their current policies are being cancelled effective December 31, primarily as a result of Obamacare’s minimum standards for health insurance. Apparently most of the policies sold in the individual market fall below what is deemed acceptable coverage, and can no longer be sold.*

This potentially raises a serious problem for many of the estimated seven to thirteen million Americans who may have their health insurance cancelled. Presumably the expectation was that most of these people will go to the Obamacare exchanges and get new policies that begin on January 1, 2014, especially those that qualify for subsidies.

But as you’ve likely heard, those exchanges aren’t functioning very well, and at the moment signing up for health insurance through them is proving extremely difficult for most. Which means that it is possible that many of the millions of Americans getting their health insurance cancelled may not be able to sign up for new insurance in time. Because of the way insurance companies process new enrollees, it appears that the deadline for signing up for new insurance that is effective January 1, 2014 will be December 15, 2013.

So, if the web sites aren’t working well enough in time for the millions of people losing coverage on December 31 to get new coverage that starts at the beginning of next year, what other options are there if they want to avoid being uninsured? 

To begin with, the people receiving the cancellation notices can if they want avoid the exchange entirely and instead go directly to the insurers and buy plans outside of the exchange, but press reports I’ve seen suggest the new premiums are often much higher. Some will no doubt chose to do this, but others will likely want to know if there are any alternatives.

As it turns out, many of the things I’ve been writing about here just might be acceptable alternatives. One of these would be a short-term health insurance policy, which I featured a few days ago. Kaiser Health News, a program of the Kaiser Family Foundation, had an article on Monday about these policies:

Short-term plans can skirt health law requirements  

What a difference a day makes. Consumers who buy a health insurance policy good for only 364 days might save hundreds of dollars in premiums, but they could also find themselves without important benefits and charged a penalty for not having insurance next year.

Under the health care law, in January most issuers have to start accepting all applicants regardless of their medical conditions and offer plans with comprehensive benefits that limit out-of-pocket costs. But short-term medical plans, defined as policies with terms lasting less than 12 months, can sidestep all the law’s new requirements. A number of insurance vendors are taking advantage of this loophole and offering plans with skimpier coverage that last up to 364 days…

Arkansas Blue Cross and Blue Shield’s 364-day Essential Blue Freedom plans’ least expensive option would cost a 40-year-old Little Rock resident $114.04 per month, half the $231.38 premium for the least expensive bronze plan the carrier offers that meets health law requirements.

…Short-term policies have been around for decades. With a term that typically lasts as long as three or six months, consumers often purchase them after graduating from school or while they’re between jobs…

Experts say some consumers who prefer less comprehensive coverage may make a calculated decision to pay the penalty for not having insurance in exchange for a lower premium. That may make some financial sense in 2014 when the penalty is a modest $95 or 1 percent of family income, whichever is greater. But it may be tougher to shrug off the fine when it grows to $695 or 2.5 percent of family income in 2016, they say.

The tone of the article is decidedly negative when it comes to short-term insurance, but depending on how long the online exchanges continue to have difficulties, buying an insurance policy that only lasts for a few months until the Obamacare web site is working may be the simplest option for many. The easiest way to find short-term health insurance available in your state is probably just to go to ehealthinsurance.com.

Another option of course would be to join a health sharing organization. There are four that I’m aware of, Samaritan MinistriesChristian Care MinistryChristian Healthcare Ministries, and Liberty HealthShare. These are voluntary organizations whose members agree to share each other’s medical bills, similar to insurance. More than 150,000 Americans get their health care paid through these organizations, and they typically cost about half of what insurance premiums are.

The first three listed are all for Christians only, but the last, Liberty HealthShare, is organized around a shared ethical belief in religious tolerance and is open to people of all faiths or no faith at all. One added bonus is that the tax for being uninsured is waived for members of sharing organizations, who are technically considered uninsured.

A third solution would be to buy a fixed-benefit policy. This insurance offers a fixed amount to be paid directly to the patient to use to pay for needed medical care. The policy I’m somewhat familiar with, offered by Assurant Health, pays benefits according to Medicare rates.

For people concerned about being uninsured on January 1 if they can’t sign up for a replacement plan through the online exchanges, short-term insurance, membership in a health sharing organization, or a fixed benefit policy may be the best options, because they offer benefits that are the most similar to those available in the policies being cancelled and available on the exchange.

Readers of The Self-Pay Patient know there are more alternatives of course, such as critical illnessaccident, and even life insurance policies. And there’s always the option of going without any type of protection against major medical expenses, and relying instead on paying out of pocket for everything and shopping for the best deals on care.

But I’m guessing that most of those receiving cancellation notices place some value in having protection against major medical bills, otherwise they wouldn’t have health insurance in the first place.

Will any of the people getting cancellation notices need to consider some of the alternatives? It all depends on how soon the exchange web site gets fixed to the point that people can easily enroll, and I have no way to predict that. But based on what I’ve been reading, and given the deadlines involved, I’d suggest that if the web site issues aren’t largely resolved by November 15, it’s time to start seriously looking at alternatives, and if the problems aren’t taken care of by December 1 people should probably start signing up for these alternatives if they want to have some form of protection against major medical bills starting January 1.

And who knows, maybe a few of them will decide they like the cost savings most of them will likely experience, and remain self-pay patients not by necessity but by choice?

*There’s a bit more nuance to it than this of course, and lots of arguments over what is really happening and what’s causing it, but this seems to me a reasonable summary of what’s going on.

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3 Responses to Options to bridge gap caused by Obamacare cancellation of health insurance policies

  1. Eric says:

    Great post which will be needed by many. The only item I’d possibly disagree with is the concern that people will pay more if they go directly to the insurance companies. This is only the case if the person is eligible for subsidies. (subsidies are given to people with incomes lower than 400% of federally defined poverty line). If you are not eligible for subsidies, you are free to buy ACA compliant insurance from any insurance company that offers such insurance and the rates will be identical to the rates quoted on healthcare.gov…. unless healthcare.gov quotes the wrong price. If you aren’t sure if you’re eligible for a subsidy, ehealthinsurance.com and many other sites have calculators, Or, if you don’t like the price for the ACA-compliant insurance, just go with a healthcare sharing ministry or or non-ACA compliant coverage and pay the fine.

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