Companies canceling health policies

Health plans are sending hundreds of thousands of cancellation letters to people who buy their own coverage, frustrating some consumers who want to keep what they have and forcing others to buy more costly policies.

The reason is mainly that the policies fall short of what the Affordable Care Act requires starting Jan. 1, according to insurers. Most are ending policies sold after the law passed in March 2010. At least a few are canceling plans sold to people with preexisting medical conditions.

"In general, the level of benefits didn't approach the minimums the health law requires," said Paula Sunshine, vice president of marketing at Independence Blue Cross in Philadelphia, explaining why about 24,000 policyholders are being notified of cancellation.

By all accounts, the new policies will offer better coverage, in some cases, for comparable cost - especially after the inclusion of federal subsidies for those who qualify. The law requires policies sold in the individual market to cover 10 "essential" benefits, such as prescription drugs, mental health treatment, and maternity care. In addition, insurers cannot reject people with medical problems or charge them higher prices.

The policies must also cap consumers' annual expenses at $6,350 for an individual and $12,700 for a family.

But the cancellation notices, which began arriving in August, have shocked many consumers in light of President Obama's promise that people could keep their plans if they liked them.

An estimated 14 million people purchase their own coverage because they don't get it through their jobs. There is no authoritative tally of the number of people affected by cancellations.

Insurer Highmark in Pittsburgh is dropping about 20 percent of its individual-market customers, and Independence, the major insurer in Philadelphia, is dropping about 45 percent.

Both Independence and Highmark are canceling so-called guaranteed issue policies, which had been sold to customers who had preexisting medical conditions when they signed up. Conversely, policyholders who had regular policies because they did not have preexisting health problems will be given an option to extend their coverage through next year.

Consumer advocates say such cancellations raise concerns that companies may be targeting their most costly enrollees.

Health insurance experts say new prices will vary and much depends on where people live, their age, and the type of policy they decide to buy. Some, including young people and those with skimpy or high-deductible plans now, may see a cost increase. Others, including those with health problems, or those who buy coverage with higher deductibles than they have now, may end up with lower premiums.

Studies have shown that about half of those currently buying insurance will qualify for income-based subsidies to offset part of the cost of coverage.