Only hours before the deadline to sign up for health insurance that will begin Jan. 1, the Obama administration has offered people whose plans have been canceled a new option. They can sign up for catastrophic coverage instead.
These little-noticed plans cover only three primary care visits, specified preventive services and medical costs that exceed a catastrophic amounts. In 2014, that’s $6,300 for an individual.
Previously, the plans were available only to those under age 30 and those who could demonstrate specific financial hardships. Subsidies aren’t available to help people purchase catastrophic policies. The administration says the catastrophic option is for people who consider other available coverage unaffordable.
“If you have been notified that your individual market policy will not be renewed, you will be eligible for a hardship exemption and will be able to enroll in catastrophic coverage,” said a memo issued by the Department of Health and Human Services late Thursday.
Those who want to purchase that coverage will still have to apply for the exemption, making it unclear whether that can happen in time for the Dec. 23 deadline.
Giving anyone with a canceled policy a hardship exemption also legally excuses them from having to pay a penalty if they going without coverage.
The new policy isn’t sitting well with insurers. “This latest rule change could cause significant instability in the marketplace and lead to further confusion and disruption for consumers,” said a statement from Karen Ignagni, president and CEO of America’s Health Insurance Plans.
And Tim Jost, a professor at the Washington and Lee University School of Law, noted that insurers have every right to be unhappy. “Allowing individuals with cancelled policies to purchase catastrophic policies is likely to cause problems for insurers who will now have to cover older and less healthy individuals through catastrophic policies priced for younger and healthier individuals,” he wrote in a blog post for the policy journal Health Affairs. “At the same time, however, the policy will siphon off individuals who were healthy enough to find affordable coverage in the pre-ACA market and who might have purchased non-catastrophic qualified health plans in the exchange.”
But Jost also wrote it’s unlikely that many of those with cancelled policies will simply opt out of the market altogether. “These are people who already purchased insurance without the mandate,” he points out. And without any subsidies.