The timing of this question couldn't be more pertinent than now has we have lost dozens of health plans in the last 18 months with more to come. Even more importantly is the fact that almost all current plans on the California health insurance market will disappear Jan 1st 2014 when Health Reform kicks up in earnest. It's important to look at what happens when a health plan is "closed" because odds are, it will happen to you. Let's jump right in...what if you get the letter that your plan is being closed.
First, there are two different scenarios prior to Jan 1st 2014 for plan closures.
In some cases, Carriers will close a plan to new enrollees but allow existing members to stay on the plan if they choose to. In other cases, they close the plan altogether to both new and existing enrollees. Why are plans closed in the first place and what options do we have if we're an existing member. Occasionally, health plans are closed just because they are not attractive to the market which means that they do not have enough members to provide a big enough risk pool. This means that a few really big claims (say $500K plus) can doom the plan or has already. On the other hand, we've seen plans that are too popular which means that the pricing was to low to support the resulting claims. There's a great deal of pressure these days both publicly and at the State legislative level to contain rate increases. If a health plan's claims genuinely require a 25% rate increase to stay viable but the State will push back (not to mention bad press in the papers) against anything over 10%, the plan has a problem. Rather than be the bad guy on the increase side, the carrier may just close the plan altogether. We've seen few of these lately. So what happens to existing members?
Existing members are always given an opportunity to move a similar plan (might be up or down in benefits/cost depending on where the prior plan was positioned) guaranteed issue which means regardless of health and with no change in tier. Tiers are increases in rates based on health at the time of original underwriting. If the member is in good health, there's nothing preventing them from running an instant California health quote to see what's available on the market. The plans and rates have changed quite a bit over the last years so it's not a bad idea to see what's out there. This brings up a good time to introduce the "Grandfathered" plans.
Grandfathered plans refers to plans with an effective date prior to 3/23/2010. If you're plan was effective before that date and you haven't made changes, you have a special classification. These plans are essentially closed since no new enrollee can join them. In a normal market, closing a plan usually is the death knell of that plan eventually. This is how it happens. There will inevitably be a rate increase. Healthy people will check out the market and find better priced, newer plans. Unhealthy people will be unable to move due to health. The risk pool gets more and more risky which drives further rate increases and the cycle accelerates. The Grandfathered plans are different however. They do not have many of the health reform mandates so they have remained less expensive than the newer plans for comparable benefits. When we have run quotes against Grandfathered plans, it's hard to beat their pricing.
Now, the Big Closing coming Jan 1st, 2014. All plans aside Grandfathered plans will essentially be closed Jan 1st 2014 and then we'll have plans available...Platinum, Gold, Silver, and Bronze. At that point, it will make sense to re-analyze the options and we're more than happy to help you with this process.
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