We\’ve seen an unprecedented number of California health plans being closed in the last few years. Some of this is just the continuation of a natural cycle of plans which we\’ll discuss later while others are brought on by the piecemeal introduction to Health Reform statutes which we\’ll also investigate. Most importantly, we\’ll look at how closed plans affect you if you\’re in one and why it prompts a quick investigation of what the market has to offer. Let\’s jump right in.

First, let\’s look at the original reason for plans to be closed. Over the past decade, we have seen maybe a few dozen plans be closed among the main carriers (Anthem Blue Cross, Blue Shield of California, Health Net, and Pacificare. Plans have been closed on both the individual and family market as well as the Small Group market in California. So what does this mean and why do the carriers do this? Essentially, a closed plan is one that will no longer accept new enrollees. Typically, the original members can remain on the policy but new members cannot join. Changes to and from can also be more difficult if not impossible outside of adding family members to an existing policy. This is the first situation where a plan remains in effect but no new members can join. The other alternative is where the plan is shut down altogether and existing members are moved to another plan generally of similar benefit level. This is a bit more concerning since people with health issues will generally have no options beside the designated transfer plan. For the most part, the new plan has been very similar in benefit level to the original plan and generally matches the type of plan (hmo to hmo, hsa to hsa, etc). Suffice it to say, it can be a mysterious process within health insurance carriers in terms of which plans succeed and which ones are closed but generally speaking, there is probably an underlying exposure to risk within a closed plan versus other plans the carrier has on the market. The carrier may also want to streamline their plan offering especially with new plans coming on the market almost annually these days. The carrier doesn\’t want to be in a situation from both an operations stand point or a marketing standpoint where they have 50 plans on the market. New plans come on board to reflect changing claims and health care usage (such as brand RX benefit use and cost).

In general, you don\’t want to stay on a closed plan for this reason. Health people in your plan will likely look at options when the next rate increase hits and find one of the newer plans to be less expensive. Being healthy, they will jump ship. Unhealthy people will be unable to change plans and therefore, the \”pool\”s claims experience will deteriorate which ends in a spiral as the resulting rate increases accelerate this unhealthy exposure. There are some situations where this is generally not the case and the Health Reform mandates allow us an easy transition.

Health Reform made a demarcation in the sand…plans effective prior to 10/23/2010 would be \”grandfathered in\” which means that the new mandates coming online through 2014 would not apply to these older plans as long as they were not changed. Any plan effective 10/23 or after would be subject to the mandates. Of course, when rate increases come up (which inevitably, they do), people look around to see if they can find a better rate. The theory is (and so far, so good), that the newer plans will be more expensive due to the mandates and therefore, there will be nothing better to jump to. This will prevent the healthy people departing mentioned above in the rate spiral. These grandfathered plans, which are essentially closed, should remain competitive until the big switch over in 2014 at which point, everything\’s up in the air. That\’s a discussion for another day. Until then, if you have questions about options available to you as a closed plan member, please contact us or run your quote (assumes good health for adults) at www.calhealth.net

Dennis Jarvis is a licensed California health insurance agent with extensive knowledge of the Individual California health market. affordable California health insurance

Dennis Jarvis is a licensed California health insurance agent with extensive knowledge of the Individual and Small Group California health insurance market. http://www.calhealth.net

Author Bio: Dennis Jarvis is a licensed California health insurance agent with extensive knowledge of the Individual California health market. affordable California health insurance

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