Obama Grants One Year Reprieve For Existing Health Insurance Plans

(Photo credit: Wikipedia)

Responding to intense pressure from political adversaries and friends alike, President Obama announced this morning that the grandfathering rules, which already permit certain existing health care plans to continue if they existed before the Affordable Care Act became law, will now be extended to include all existing health care plans for a one year period-including those plans that are noncompliant with the benefit upgrades required by the Affordable Care Act.

The 'fix', which is being effectuated administratively by the White House and without the approval of Congress, will go a long way to allow Obama to keep his promise guaranteeing that if you like your insurance policy, you can keep your insurance policy.

There are, however, some caveats.

It will be up to the insurance companies and state health insurance commissioners to determine if they wish to revoke the cancellation notices they have previously sent out to somewhere between 3 and 5 million people, and reissue the previously existing policies. While this may continue the pain for some who have been cancelled-should their insurer decide they don't wish to reinstate a particular policy-the requirement will serve to highlight which insurers cancelled their plans for business reasons and which issued the cancellations as a direct result of Obamacare.

Additionally, insurers reinstating these healthcare plans would be obligated to inform customers of the Obamacare benefits that are not included in their existing insurance policies along with informing consumers that there may be a comparable plan available at a lower price on the exchanges.

While the change offered by the Administration is very much a political 'fix' in that it takes some of the heat off in the near term for both the President and Democrats who must run for re-election in 2014, the long-term actuarial impact on policies offered on the healthcare exchanges could prove to be problematic over the long term.

What the President's fix does not do is allow brand new customers to purchase noncompliant plans from insurance companies, something that would be permitted under the bill being put forward-and still likely to be on the calendar for a vote tomorrow in the House of Representatives-by Congressman Fred Upton (R-MI.). House Republicans, including Speaker John Boehner, have been very forthright in acknowledging that the Upton bill is designed to permanently undermine the Affordable Care Act and aid in its ultimate repeal.

There may be one an additional benefit in the President' fix that is not readily apparent. By requiring insurers to tell customers the Obamacare benefits not included in their existing policy, people may finally become better acquainted with the consumer protections the healthcare reform law provides while making it clear that these benefits do not exist in their current healthcare plans.

What is now likely to become a central part of the conversation is whether or not the President can make these changes on his own or must have a vote of Congress to bring about this change. The White House opinion is that the law allows the Deparament of Health & Human Safety the discretion to implement such a change during a transitional period given the temporary nature of the alteration.

It is, however, highly likely that Congressional GOPers will disagree and raise a fuss about this.

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