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Obama yields on below-par insurance

Lets policies continue for a year, accepts blame for consumer uproar

The president bowed to party pressure.

Larry Downing/Reuters

The president bowed to party pressure.

WASHINGTON — President Obama, bowing Thursday to pressure from Democratic allies and seeking to ease the controversy engulfing his health care law, said he will allow insurance companies to continue providing insurance coverage that falls short of new standards for an additional year.

Brought about by a self-inflicted wound, it was a major concession by the president on a core element of his 2010 Affordable Care Act.

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Purging substandard plans, with their low premiums but weak and patchy coverage, is considered crucial to overhauling insurance markets. The individual market for years has been the arena for coverage denials for preexisting conditions, premium increases, and the highest deductibles and copays.

But Obama, by his own admission, blundered. He promised Americans multiple times that they would be allowed to keep their existing insurance under his new law, if they liked it. So when insurance companies sent out hundreds of thousands of cancellation notices for noncompliant individual plans in recent weeks, it created a political furor.

“That’s on me,’’ Obama said Thursday in a White House news conference, as he announced he would honor his earlier promise by delaying the standards for existing plans for one year. “That’s something I deeply regret.”

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Combined with the botched rollout of the healthcare.gov online insurance marketplace, which is still under repair more than six weeks after its launch, Obama said the troubled start of the new health plan has caused political damage for his Democratic allies in Congress who supported it.

He apologized for “not executing better,’’ but said the broader goal of covering the uninsured remains intact.

‘It is important to understand that the old individual market was not working well. It’s important we don’t pretend that somehow that’s a place worth going back to.’

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“These were two fumbles on a big game,’’ he said. “But the game is not over.’’

Obama was forced to act after frustrated Democrats in Congress backed legislation to restore coverage and block further cancellations in the individual market, which represents about 5 percent of health policies in the United States. The allowance would only be available for those enrolled in the substandard plans as of Oct. 1.

Obama’s move seemed to cool some of the immediate anger from within his own party. But Republicans like Senator Lindsey Graham of South Carolina continued to criticize the law, capitalizing on the sense of confusion and frustration. He dismissed Obama’s change as a “duct tape solution.’’

It was unclear whether the change would actually result in significantly fewer cancellations. And for affected consumers, a one-year reprieve may just deflect anger toward a new target: insurance companies.

Insurers who have already canceled plans may choose not to revive them, because premiums and coverage have already been calculated for new plans based on assumptions about the new standards.

A health insurance trade group warned that the president’s action could be disruptive.

“Changing the rules after health plans have already met the requirements of the law could destabilize the market and result in higher premiums for consumers,” Karen Ignagni, president and chief executive of America’s Health Insurance Plans, said in a statement.

If fewer young, healthy consumers buy coverage through the healthcare.gov marketplace, Ignagni warned, “premiums will increase and there will be fewer choices for consumers.”

The Affordable Care Act requires coverage of an array of services, including primary care visits and maternity care. The administration was banking on many of the people who have received cancellation notices being able to sign up for that improved coverage on the marketplaces that debuted in October. Many would be eligible for Affordable Care Act subsidies, so the premiums for millions of people would be as cheap as or cheaper than their old, less-comprehensive plans.

But many consumers who tried were unable to make that transition because the healthcare.gov website was plagued by a host of technical woes that prevented them from signing up.

Obama’s reprieve will not be universally available. Obama said individual state insurance commissioners can decide not to participate. Washington State immediately announced it would not participate in Obama’s offer of a one-year extension.

To continue offering the substandard plans, insurers will be required to tell customers what they are missing out on by not signing up for a new plan on healthcare.gov.

“It is important to understand that the old individual market was not working well,” Obama said. “It’s important we don’t pretend that somehow that’s a place worth going back to.’’

Jonathan Gruber, an MIT professor who was an architect of the landmark 2006 Massachusetts health plan and an adviser on the Obama plan, said Obama’s move seemed like a reasonable compromise given the deep problems encountered with the rollout. But eliminating weak insurance plans from the marketplace remains an integral part of preventing insurance companies from denying insurance coverage and jacking up premiums for people with preexisting conditions.

“What this whole debate misses is that Obamacare is the least disruptive way we can fix insurance markets in America to achieve the goal of nondiscriminatory insurance,” Gruber said.

But people wanted more, he observed. “They wanted a free lunch. They wanted to fix discriminatory insurance markets without inconveniencing anyone who holds discriminatory insurance. You can’t do that.”

Jon Kingsdale, former head of the Commonwealth Health Insurance Connector Authority, said Obama’s announcement leaves many questions unanswered as state insurance commissioners in 50 states figure out if and how to carry forward the plan.

“They’re kicking it to the commissioners of insurers, saying ‘You figure out how to implement this,’ ” Kingsdale said. “The health plans are quite cranky because they have all made plans under one set of assumptions and now the rules of the game have changed literally after they have suited up and gone out on the court.”

Unlike a Republican plan that the House is expected to vote on Friday, the president’s relief plan would not allow the substandard plans to be sold to new customers.

Several Democrats had indicated prior to Obama’s plan that they would support the Republican bill. By announcing the plan one day before the vote, Obama helped House minority leader Nancy Pelosi maintain stronger Democratic unity in the chamber, although a modest number of party defections Friday still remained likely.

Divisions among Democrats also continued in the Senate, where Democrats have introduced a bill to allow existing policyholders to keep below-standard plans indefinitely. Following Obama’s announcement, Senate Democratic leaders indicated they were unlikely to bring anything to the floor, to prevent a full-scale revolt.

“There is no need for a legislative fix for this issue,” said Senator Dick Durbin, an Illinois Democrat and the assistant majority leader.

Senator Mary Landrieu, a Louisiana Democrat who initiated the bill, and other cosponsors, including Senator Jeff Merkley of Oregon, said they would push forward.

“The president’s announcement this morning was a great first step and we will probably need legislation to make it stick,” Landrieu said.

Republicans vowed to keep up the fight against the president’s largest achievement straight into the 2014 election season. House Speaker John Boehner took a shot at Obama, hoping to highlight the president’s broken promise.

“When it comes to this health care bill,’’ Boehner said, “the White House doesn’t have much credibility.’’

Tracy Jan can be reached at tjan@globe.com. Follow her on Twitter @GlobeTracyJan.
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