As Coloradans begin shopping for health insurance via the newly opened exchange, the Division of Insurance is looking into letters some people say they’ve gotten from their insurance carriers warning of higher rates if they don’t renew their existing policies.
The letters usually include an offer from the carrier to renew the customer’s policy with a manageable rate increase if they agree before the normal renewal period to remain with the plan. But if the policyholder waits until 2014, the letter states their rates will shoot up.
Northern Colorado Business Report publisher Jeff Nuttall says insurance regulators are keeping an eye on the situation.
"They are investigating complaints from individuals and small businesses who have found the letters confusing or misleading," Nuttall says. "In anticipation of these notices, the Division of Insurance issued a regulation in late July that dictated what letters from carriers discussing plan transitions must include."
Some other states have experienced similar confusion, and the Kentucky Department of Insurance actually issued a $65,000 fine to one insurance carrier. The complaint alleged that Humana sent letters to policyholders instructing them to renew within 30 days or be switched to a more expensive policy.
Nuttall says none of the letters received in Colorado went that far. Rather, they encouraged customers to renew their existing policies early.
The Colorado Division of Insurance did not identify any specific carriers about whom they have received complaints. But they do encourage anyone who has received a letter and is unsure of what it means to contact them.
Interview highlights
Are letters like this even permissible in the context of the Affordable Care Act?
"The Division of Insurance is keeping an eye on the situation. They are investigating complaints from individuals and small businesses who have found the letters confusing or misleading. 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."
How do grandfathered plans work with the new health care law?
"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. Premiums on the plans can change without impacting their status, but still must be reviewed and approved by the DOI."
How do the rates for grandfathered plans compare with new policies?
"It varies by plan, but 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.' These benefits include things such as prescription drugs and maternity and newborn care. Many people believe such benefits should be available a la carte, so that each policyholder can buy the benefits that apply to them. For reasons such as this, many are choosing to stick with their current plans, and for those people, renewing early to lock in a lower rate is an attractive prospect."