Q. I have a question about the grandfathered status of my health insurance. I have had this individual policy since 2005 and have paid the premium continuously. Does the insurer have the right to terminate the plan?
A. Yes, it does have that right. An insurer generally can’t single out one individual and cancel that person’s policy, but it can terminate coverage for everyone in a “block of business” that it sold a particular policy to. This has long been the way the health insurance market works and it continues to operate this way today, says Karen Pollitz, a senior fellow at the Kaiser Family Foundation. (KHN is an editorially independent program of the foundation.)
(This is different from the highly publicized problems that individuals sometimes used to confront when they became ill. In the past, some insurers dropped people after they got sick, claiming they lied on their applications. These rescissions are prohibited under the health law unless someone commits fraud.)
Being in a grandfathered individual plan—meaning you had it when the health law was signed on March 23, 2010, and it hasn't changed substantially since then—doesn’t prevent an insurer from canceling your policy.
Starting in January, individual plans have to meet new standards for cost and coverage, among other things. Insurers and states have taken different approaches to canceling plans that are already in effect, whether grandfathered or not.
The issue has caused a political and public relations headache for the Obama administration. As consumers began receiving notices in recent weeks that their individual plans were being cancelled so they could be transitioned into plans that meet the new standards, some reacted furiously, claiming that the president was reneging on a promise that they could keep their existing plans if they liked them. Last week, President Barack Obama announced that the administration would permit insurers to renew some policies slated for cancellation even though they don’t meet the new standards. Some state regulators and insurers have accepted that option but it’s unclear how many will go along.
“I think people do really value continuity of coverage, and on many dimensions it has to be upsetting to get one of these [cancellation] notices, particularly if you thought you were grandfathered,” says Pollitz.
Still, in general people who have held an individual policy for a long time and faced annual premium increases may be paying higher premiums than they would if they had changed plans over the years, says Pollitz. “I would have predicted that grandfathered people would be at the head of the line [to switch].”