Feds announce new option for insurance customers facing cancellation

The federal government on Thursday offered a new option to people whose health plans are being discontinued, allowing them to purchase “catastrophic” insurance policies with high deductibles that the federal health care law prohibits most people from buying.

The announcement, less than two weeks before the first insurance policies sold as part of the Affordable Care Act take effect, drew sharp criticism from the trade group representing health insurance companies.

“This latest rule change could cause significant instability in the marketplace and lead to further confusion and disruption for consumers,” Karen Ignagni, president and CEO of America’s Health Insurance Plans, said in a statement.

Catastrophic insurance plans have high deductibles but lower premiums than more coverage-rich plans. Connecticut’s health insurance exchange, Access Health CT, offers three catastrophic insurance plans. Each has a $6,350 deductible for an individual and a $12,700 deductible for family coverage.

The health law commonly known as Obamacare sets minimum coverage requirements for health plans that effectively outlaw many high-deductible plans that had been offered in the past.

Health insurance exchanges that sell private insurance can offer catastrophic policies, but until Thursday, they were only available to people in two categories: Those under 30, and people deemed exempt from the health law’s individual mandate because no other available plans were considered affordable — that is, costing no more than 8 percent of household income.

The rule change announced Thursday creates an exemption for people who were notified that their individual-market policies won’t be renewed and who consider the other available policies unaffordable. Those people will be allowed to buy catastrophic policies, but must complete a “hardship exemption form.”

“If you believe that the plan options available in the Marketplace in your area are more expensive than your cancelled health insurance policy, you will be eligible for catastrophic coverage if it is available in your area,” the notice said. The term “marketplace” refers to health insurance exchanges.

The rule change marks the latest effort to assuage the anger of people whose plans are being discontinued, in some cases, because they no longer met the requirements of the federal health law. The wave of policy termination notices produced a political firestorm earlier this year because President Obama had assured people that those who liked their insurance policies could keep them under the health law.

Last month, Obama gave states the option of allowing insurance policies that didn’t meet the new requirements to be continued for a year, if the insurers wanted to continue offering them. Some states adopted the option, but Connecticut did not. Gov. Dannel P. Malloy said it wasn’t a good fit for the state, and noted that insurers would not have continued the plans slated for termination.

The Malloy administration said in November that 38,561 individual-market policies in the state won’t be continued in 2014. But some of those policyholders were given the option of renewing their existing plans early or buying a new plan that took effect Dec. 1, allowing them avoid the new rules — and costs — of the health law.

Among the customers who have bought policies through Connecticut’s exchange so far, 2 percent have selected catastrophic plans.

On Friday evening, Access Health released instructions for people with canceled plans who wish to take the new option.

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