WASHINGTON (TheBlaze/AP) -- The White House is reportedly considering an extension for Americans who have had their health insurance policies cancelled under the Affordable Care Act.
Avalere Health CEO Dan Mendelson said Thursday that the administration may let policyholders keep their individual insurance policies for as long as an additional three years -- even if they are not compliant with the health care overhaul
Mendelson stressed that no decision has been made.
If the White House moves forward with this extension, it would be a major reversal. The Obama administration and its allies initially dismissed complaints of cancelled policies by explaining that those policies were no good anyway.
Policymakers are waiting to see what rate hikes health insurers plan for the insurance exchanges that are key to the overhaul's coverage expansions.
"The administration is entertaining a range of options to ensure that this individual market has stability to it, and that would be one thing that they could do," he said.
Avalere Health is a consulting firm, but Mendelson said his company was not advising the administration on exchange policy. He said he has had informal discussions with administration officials about the extension, but he didn't identify them.
Health and Human Services spokesman Joanne Peters confirmed that the issue is under discussion, saying: "We are continuing to examine all sorts of ways to provide consumers with more choices and to smooth the transition as we implement the law. No decisions have been made."
Aetna Inc. Chairman and CEO Mark Bertolini also told analysts during a conference call Thursday to discuss quarterly earnings that he had heard the plans may be extended. Aetna is the nation's third-largest health insurer and has about 135,000 paid customers so far through the exchanges.
Aetna Chief Financial Officer Shawn Guertin said in an interview after the call that there have been discussions about whether the plans should be extended again, but he didn't have any more details.
Individual policyholders were hit with a wave of cancellation notices last year because their coverage was "less robust" than what is required under the law, and many states allowed insurance companies to simply cancel them
This became one of the most politically explosive issues in the transition to a new health insurance system under Obama's law. The wave of cancellation notices — at least 4.7 million of them — hit just when the new healthcare.gov website was experiencing some of its worst technical problems, and it undercut the president's well-publicized promise that if you liked your plan you could keep it.
The law included a scheme called "grandfathering" to try to deliver on Obama's pledge. It was intended to shield policies in force at the time of the law's 2010 enactment from many new requirements, provided the policies themselves changed little. But insurers considered it impractical. And many of the cancelled individual policies would not have been eligible for relief anyway, since they were purchased after the law's passage.
The predicament of millions of Americans who had cancelled policies and a hard time getting new ones because of the dysfunctional government website put the administration in an even more uncomfortable position.
At first the White House went into damage-control mode, arguing that many of the cancelled plans were "junk" insurance and consumers would be better off with the broader coverage available through the health care law's new insurance markets.
But soon Obama was forced to reverse course, urging insurers and state regulators to allow policyholders to keep their existing plans for an additional year. Most states complied with the request.
WASHINGTON, DC - NOVEMBER 15: U.S. President Barack Obama (R) speaks as Marilyn Tavenner (2nd R), administrator of the Centers for Medicare and Medicaid Services, and Senior Adviser of Health and Human Services Office of Health Reform Michael Hash (3rd R) listen during a meeting with CEOs from across the health insurance industry at the Roosevelt Room of the White House November 15, 2013 in Washington, DC (Getty Images)
Now the administration is considering adding more time to the extension to avoid another wave of problems if rates on the exchanges climb too high and people are left without affordable coverage. Health insurers are supposed to submit by May the rates they want to charge for coverage they sell on the exchanges next year.
The exchange coverage just started last month, so that doesn't give insurers a lot of time to figure out what sort of claims will come from this new coverage. They need to understand this before they set premiums for the next year.
That means insurers may lean toward higher rate increases in 2015, to make sure they collect enough money in case medical claims come in higher than expected.
Mendelson said the administration understands this and is considering ways to promote rate stability. It could wind up extending the coverage for just another year or not all. "If you're trying to craft policy, you have to see first what's going to happen in this market before you can respond," he said.
It's unclear whether policyholders will find any relief if they are allowed to stay with their extended policies. Insurers in several states where extensions were allowed for 2014 have said they planned to hike the cost of those plans.
One last question: If there is an extension, why three years?
"Because by then Obama will be gone," Zero Hedge suggests, "and Obamacare will be someone else's problem."
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This post has been updated.