Newest ObamaCare failure: Automatic renewals

ObamaCare advocates have spent the summer trying to put the sunniest spin possible on the law, and they’d better make the best possible use of the time. Premium increases will hit in the fall as insurers adjust for the less-than-optimal additions to the risk pools in 2014, and the best that advocates can argue is that the average increase percentage might just barely avoid double digits. That, National Journal notes, was the the pace of premium increases without ObamaCare, too; so much for bending cost curves downwards, eh?

This fall, though, it won’t be business as usual for ObamaCare policyholders in another important way. Most people assume that their existing policies will automatically renew, and after all the struggles that these consumers had in getting enrolled the first time around, they had to be looking forward to avoiding the process for 2015. And they’re right about autorenewal, but they’re in for a big surprise about what it means:

If you have health insurance on your job, you probably don’t give much thought to each year’s renewal. But make the same assumption in one of the new health law plans, and it could lead to costly surprises.

Insurance exchange customers who opt for convenience by automatically renewing their coverage for 2015 are likely to receive dated and inaccurate financial aid amounts from the government, say industry officials, advocates and other experts.

If those amounts are too low, consumers could get sticker shock over their new premiums. Too high, and they’ll owe the tax man later. …

But unless the administration changes its 2015 approach, “they’re setting people up for large and avoidable premium increases,” said researcher Caroline Pearson, who follows the health law for the market analysis firm Avalere Health.

It could be a new twist on an old public relations headache for the White House: You keep the health plan you like but get billed way more.

What happened? The autorenewal process does work, but for those getting subsidies (about 80% of all ObamaCare enrollees), the calculations change on two levels. Subsidies are based on income levels, which change from year to year for most people, and the exchange systems have no back end to recalculate the subsidies. That means some of these people will either get shortchanged and pay more than required for their premiums, or their insurers will get overpaid, which leaves the taxpayer on the hook to make up the difference at the end of the year. Talk about surprises.

But that’s just the part that taxpayers might be able to control if the system allowed for updates on income. Subsidies are also calculated on certain benchmarks of community pricing within the exchanges, a formula that will change significantly as premiums shoot up this fall. How do taxpayers calculate and plan for that? The simple answer is: they don’t. No one will know the benchmarks until later, which means a lot of people who autorenew will get a shock when they file their tax returns.

It’s worth pointing out that employer-based and individual-market plans increased in prices before ObamaCare, and employers often adjusted their contribution on an annual basis, even with an “autorenewal” (although most employers require workers to re-enroll each year because of that). However, until ObamaCare came along, consumers knew what the costs were up front — and the change didn’t involve getting socked with a big bill from the IRS.

At the same time that consumers get socked with higher prices on the premium side, they’re also discovering as the year wears on that getting health insurance is not the same as getting access. The narrowed provider networks have cut many off from their doctor of choice, and in some cases from any provider at all:

Both women unwittingly enrolled in policies with limited networks of doctors and hospitals that provide little or no payment for care outside those networks. Such plans existed before the health law, but with its expansion of insurance, they are covering more people — and some are shrinking enrollees’ options further than before. The policies’ limitations have come as a surprise to some enrollees used to broader job-based coverage or to plans they held before the law took effect.

“It’s totally different,” said Pippenger, 57, whose new Anthem Blue Cross plan doesn’t pay for any care outside its network, although the job-based Anthem plan she had last year did cover some of those costs. “Now I can’t find a doctor.”

Consumer groups argue many enrollees were misled. In California, consumers filed class-action lawsuits against some insurers, alleging they were given inaccurate information about their plans’ limitations and about which doctors and hospitals participate in them. …

Other insurers made similar decisions, offering managed care plans as the only choice for residents buying through the new marketplaces in entire counties in Indiana, Georgia, South Carolina, Virginia, Florida, Wisconsin and Mississippi, according to government data analyzed by Kaiser Health News. Nationally, 43% of mid-level “silver” plans offered in California, New York and 34 states using the federal marketplace have no coverage outside their networks, a study by the American Cancer Society Cancer Action Network found.

“They’re all doing it,” says Wall Street analyst Ana Gupte of Leerink Swann, an investment bank. “Obamacare is putting pressure on their margins, so they’re on the hook to moderate costs.”

As Robert Heinlein once famously said, “There ain’t no such thing as a free lunch.”