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From Health Law Daily, November 6, 2013

California Blue Shield policyholders get 90-day reprieve

By Harold M. Bishop, JD

The Commissioner of the California Department of Insurance (CDI), Dave Jones, has announced an agreement with Blue Shield of California Life and Health Insurance Company (Blue Shield) to allow 115,000 California policyholders to keep their individual and family health insurance policies through March 31, 2014. Blue Shield previously notified CDI that it sent notices to these policyholders indicating that it would cancel these individual and family policies on December 31, 2013. Jones objected to Blue Shield's December 31, 2013 cancellations and threatened legal action because under California law policyholders are entitled to 180 days’ notice if their carrier is going to stop selling new policies in a particular market.

Reasons for CDI action. Jones not only disagreed with Blue Shield’s decision to cancel the individual and family policies at the end of 2013, but he also disagreed with Covered California's decision to require health insurers selling in the Exchange to cancel existing policies on December 31, 2013. Jones stated that "Health insurers and Covered California are allowing small businesses to renew their existing plans past December 31 and should have allowed individuals and families to do the same. The existing policies are likely to have a broader network of medical providers and for those who are not eligible for premium subsidies, a lower cost than what is available in 2014.” In fact, according to CDI, if all of the existing Blue Shield policyholders decide to stay in their current plans until March 31, 2014, their total premium savings could be as high as $28.6 million.

The agreement. Under the agreement, Blue Shield will send a new notice to consumers allowing them to stay in their individual market policies if they elect to do so and will provide their existing coverage through March 31, 2014, at the existing price, and with the existing medical provider network.

Risks to policyholders. According to Blue Shield, there are significant risks to policyholders who extend their coverage through March 31, 2014. Blue Shield suggests that policyholders consider the following:

  • They may have to pay a deductible twice in one year: When they transition to a new policy in April, they may have to meet a separate deductible for the new plan and may not receive credit for their earlier payments.

  • They may also miss out on tax credits and cost-sharing subsidies which are only available for plans that meet the requirements of the Affordable Care Act (ACA) and are purchased through Covered California on the Exchange.

  • They must enroll in a new ACA-compliant plan by March 15, 2014 to avoid a gap in coverage after March 31, 2014.

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