SACRAMENTO, Calif. (AP) — California's insurance commissioner announced an agreement Tuesday with one of the state's major health insurance companies to delay the cancellation of more than 115,000 individual policies under the new federal health care law.
The agreement with Commissioner Dave Jones will let policyholders keep their lower-priced policiesthrough the first three months of 2014.
Blue Shield of California Life and Health Insurance Co. planned to cancel individual and family health insurance policies on Dec. 31. Jones objected that the company gave policy holders just 90 days' notice when it is required to give six months.
The agreement requires Blue Shield to send new notices to its customers starting Wednesday, letting them know they can keep their individual policies if they wish, at the existing price and with the existing medical provider network. Jones projected that if all of the Blue Shield policyholders keep their existing plans, they could save a cumulative $28.6 million.
But he also said policyholders who are eligible for federal premium subsidies through Covered California, which runs the state's health insurance exchange, will likely want to choose new policies by Dec. 15 so they can begin receiving the subsidies starting Jan. 1.
Jones criticized health insurers and Covered California for jointly agreeing that all existing policies should be canceled at the end of this year. Small businesses were allowed to renew their policies past the end of the year, and Jones said in a statement that individuals and families should be given the same leeway.
Neither state nor federal law requires such cancellations, and Jones said existing policies offer benefits that include a broader network of medical providers and lower costs for consumers whose incomes are too high to be eligible for premium subsidies.
Covered California spokesman Santiago Lucero did not immediately return a telephone message. But Blue Shield spokesman Steve Shivinsky said the exchange and insurers made the right choice in attempting to cancel all individual policies at year's end.
"We need the largest number of individuals, healthy or otherwise, to be in the risk pool as early as possible to balance the risk ... across all ages and health status," Shivinsky said.
He said the company agreed to the delay when Jones threatened a lawsuit.
The delayed deadline could cause confusion for policyholders, Shivinsky said. It might force consumers to start their annual deductible over again on April 1, and eligible consumers could miss out on tax credits and cost-sharing subsidies if they wait.
No agreements with other insurers are in the works because the insurance regulators know of no other insurance company that did not provide proper notice to its customers, Jones said during a news conference at his office.
Blue Shield was unique among the state's insurers in being required to provide 180 days' notice before canceling policies, instead of the usual 90 days. That's because it withdrew its policies from regulation under the state Department of Insurance and moved them under the Department of Managed Health Care, triggering a longer notice requirement.
The regulatory switch provided the company with a $107 million tax benefit, Jones said. Shivinsky said the decision was made to save administrative costs because most of the company's policies already were regulated by the Department of Managed Health Care.