Blog PostJanuary 13, 2014

SMBS Likely to Receive Next Wave of Plan Cancellation Letters

Since its October launch, the Affordable Care Act (ACA) has had several setbacks apart from the many technology problems which caused the botched rollout of the new online insurance exchanges.

For example, last fall millions of Americans found out that their health plans were cancelled by insurers for not meeting the stricter minimum benefits requirements of the new healthcare law.

It’s true those plans will have to be replaced by plans with better coverage but Americans have no guarantees they will be able to keep their current care providers under these new plans along with many other uncertainties. Originally the Obama Administration argued that these terminations only affected a small portion of the population but may industry experts believe that the same situation is in store for millions more Americans, mainly those who receive their insurance through smaller employers.

Indeed, small businesses took advantage of a sort of loophole in the new healthcare law that allowed them to keep their current plans for another year by renewing early. As a result, this larger cohort of Americans likely won’t receive their similar letters from insurers until around October of this year, right around the midterm elections. However, the new coverage requirements are not the only thing affecting small business insurance plans.

The Washington Post explains, “Many [small business cancellations] are related only indirectly to the law; insurers are trying to move customers to new plans designed to offset the financial and administrative risks associated with the health-care overhaul. As part of that, they are consolidating their plan offerings to maximize profits and streamline how they manage them. “If they do it one way, the word canceled gets attached to it. If they do it another way, they say they are amending the policy. It sounds more gentle but it’s the same thing,” said Gary Claxton, an expert in private insurance at the Kaiser Family Foundation. “The basic point is, for many people in the small-group market at some point soon their coverage is going to change.”

The impact of cancellations in the small-group market is expected to be less dramatic than in the individual market, partly because a higher percentage of small-business policies provide more generous benefits.

Still, the changes being made by the insurance industry are leaving some small-business owners confused and disillusioned about the law — whether it is directly to blame for the changes or not.

Stephen Lohman, owner of Allegheny Plant Services, a trucking company in Pittsburgh, said the Aetna PPO plan he offers his 38 employees will be discontinued at the end of this year. He said he has been offered a new Aetna policy with premiums that are 40 percent higher, and that other insurers’ rates are similar. “We were very surprised,” he said, adding that it is “important to me personally” to offer insurance to his employees, but he is not sure he can afford the premium increase…”


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