State probes claims of health-policy rate threats

As Coloradans begin shopping for insurance on the new health-care exchanges, the Colorado Division of Insurance is investigating complaints from individuals and small businesses regarding letters from insurance carriers warning policyholders to renew existing policies or face higher costs once new insurance plans become effective on Jan. 1.

Often, these letters include an offer by the carrier to renew a policyholder’s plan before that holder’s normal renewal period at a manageable rate increase, saying that if that policyholder waits until a renewal period in 2014, his or her rates will shoot up. The Division of Insurance is investigating Humana and other insurers that it has declined to identify.

At the request of the Division of Insurance, Humana Inc. sent an apology letter on Sept. 20 to policy holders who received the erroneous cancellation letters, according to a release from the DOI Wednesday afternoon.

The DOI requested that Humana issue a new letter regarding individual health insurance policy cancellations after a letter dated Aug. 28 was sent by Humana to 3,400 individual policy holders, according to the release.

Marguerite Salazar, commissioner of insurance, warns consumers to disregard the letter, according to the release.

“The letter incorrectly states that customers must choose to renew their health insurance with Humana by Sept. 28, or their insurance would be cancelled,” the release states.

“I was disappointed to see a letter that appeared threatening and incorrect going out to consumers,” Salazar said in the release. “The last thing we need is more confusion.”

Humana mailed revised and corrected discontinuance letters to its 12,000 policy holders on September 30, according to DOI.

This revised letter makes it clear that polices were not cancelled September 28. Humana’s policy holders should receive the letter later this week.

In anticipation of potentially confusing notices from insurers, the Division of Insurance issued a regulation in late July that dictates what letters from carriers discussing plan transitions must include, said Vince Plymell, spokesman for the DOI.

One of the requirements for the letters is that they must inform policyholders that they have other options, aside from keeping their current plans, Plymell said.

The rates quoted in the letters refer to “grandfathered” plans, which are allowed under the Affordable Care Act, and are not included in the DOI’s analysis of rates for new health-care plans, released in mid-August.

Plans that were created before the Affordable Care Act was signed into law on March 23, 2010, can be considered grandfathered plans that can be renewed indefinitely and don’t have to comply with the health-care act. As long as the grandfathered plans don’t change, except within parameters outlined as “acceptable” by federal law, they will maintain their grandfathered status, Plymell said. Premiums on the plans can change without impacting their status, but still must be reviewed and approved by the DOI.

Grandfathered plans often are less expensive than new plans because they don’t include elements that are mandated by the ACA, including a set of 10 benefits called “essential health benefits,´ said Scott Rankin, an insurance broker with Leading Edge Financial Group in Greeley.

These benefits include things such as prescription drugs and maternity and newborn care. Many people believe such benefits should be available a la carte, Rankin said, so that each policyholder can buy the benefits that apply to them.
For example, a 50-year-old man purchasing insurance likely has no reason to hold a plan that includes maternity care.

For reasons such as this, many are choosing to stick with their current plans, Rankin said, and for those people, renewing early to lock in a lower rate is an attractive prospect. For people happy with their current plan and the rate they are paying, renewing could be the best choice, he said.

The idea of shopping around for health insurance is not new, Rankin said. Consumers always have been able to work with a broker or on their own to compare plans from different carriers. The difference with the exchange, he said, is the federal subsidies that will be available there.

But consumer advocates say that the letters are a way for carriers to keep their current policyholders from looking into other options, either on the exchange or off, which could result in customers potentially moving their business to another carrier.

“What some insurers are trying to do is keep their current policyholders onboard before the marketplace opens,´ said Adam Fox of Colorado Consumer Health Initiative, a Denver-based health-care nonprofit.

The Division of Insurance is encouraging consumers to shop around, according to Jo Donlin, director of external affairs for the DOI.

“Consumers really need to look at all their choices,” Donlin said. “There is a lot of shopping that needs to go on.” New health plans became available for purchase earlier this week, and enrollment lasts through March 31. Plans purchased by Dec. 15 will become effective Jan. 1.

The enrollment period is six months long so that consumers have the time they need to find the right plan for them, Donlin said.

The DOI has heard from both individuals and small businesses about notifications from their carriers encouraging them to renew early or face a large hike, Donlin said.

The letters have been confusing for some policyholders, and Donlin said anyone who has received a letter and is unsure of what it means should contact the Division of Insurance.

In September, the Kentucky Department of Insurance fined Humana more than $65,000 for sending letters to policyholders instructing them to renew within 30 days or be switched to a more expensive policy.

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