California to delay federal insurance policy cancellations

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 policies through 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 policyholders just 90 days' notice when it should have given six months' notice.

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, Jones said, and 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.

New policies must meet the requirements of the federal health care law, but Janice Rocco, deputy commissioner of health care reform and policy, said in a telephone interview that old policies can continue into 2014, even if they fall short.

Before the passage of the contentious Affordable Care Act, President Barack Obama said in an address that, "If you like your current plan, you can keep it."

Late last month, as people across the country were informed that their insurance plans were being terminated, Obama conceded that "substandard plans" offered by "bad-apple insurers" would be canceled.  

The canceled plans were cheaper, but did not include basics like hospitalization or even prescription drug benefits — two of the 10 "essential health benefits" the ACA requires for individual and small group plans starting in 2014, Al Jazeera's Marisa Taylor reports.

Covered California spokesman Santiago Lucero did not return an Associated Press telephone message. But Blue Shield spokesman Steve Shivinsky told the AP 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. He disputed Jones' contention that the company was required to provide a lengthier notice.

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.

Al Jazeera and The Associated Press