by James A. Bacon

President Barack Obama threw the health insurance industry for a loop yesterday when he declared that insurers can extend by a year those policies that they had canceled for failing to meet the provisions of the Affordable Care Act. Here in Virginia that puts an obscure government official — Commissioner of Insurance Jacqueline K. Cunningham — on the hot seat.

The National Association of Insurance Commissioners has expressed strong concerns about Obama’s action, which upsets the delicate transition from the previous regulatory regime to a system of state health exchanges. Stated the NAIC yesterday: “It is unclear how, as a practical matter, the changes proposed today by the President can be put into effect.  In many states, cancellation notices have already gone out to policyholders and rates and plans have already been approved for 2014. Changing the rules through administrative action at this late date creates uncertainty and may not address the underlying issues.”

How the implementation delay will work out in Virginia is unclear. The State Corporation Commission, an independent branch of government in Virginia, has issued no statement. But the situation will likely thrust Cunningham, a career SCC staffer, to the forefront. Having worked at the commission since 1993, she was appointed as Commissioner of Insurance in 2011.

Cunningham was appointed by Virginia’s three SCC judges who, thanks to their life-time tenure, are insulated from the rough-and-tumble of partisan politics. I could find no information online regarding her attitude toward Obamacare, but her NAIC bio suggests that she has been working diligently to carry out the law: “Cunningham has been actively engaged in efforts of the NAIC regarding state responses to the requirements of federal health care law.”

A political furor has erupted as stories proliferate of millions of Americans receiving cancellations of their policies in contravention of Obama’s promise that, “If you like your health plan you can keep it.” Not all plans were canceled but many were. No numbers have been calculated for Virginia but some 73,200 people have lost their policies in Maryland and 183,800 in North Carolina, according to the Associated Press. 

The logistics of un-canceling the plans would be difficult. Insurers would have only a few weeks before the Dec. 15 deadline to figure out rates, reprogram computer systems, send notices to policyholders and enroll customers. The actuarial uncertainties — not knowing how many would re-enroll, and what their health profile looked like — would make it difficult to set rates. Making things even more complicated, allowing some people to keep their old plans would change the profiles of people entering the health exchanges, possibly throwing those actuarial calculations out of whack. The American Academy of Actuaries details the problems here.

Cunningham and the SCC will have to thread the needle between widespread outrage at Obamacare regulations that precipitated the cancellations and the incredibly complex task of resuscitating the cancelled plans. Even more fundamentally, the SCC also has to decide whether Obama’s executive action, which exempts the plans from mandated benefit standards, is even legal. Insurance commissioners in Washington state and Washington, D.C., have stated they would not allow insurers to continuing plans that do not comply with the law.

What a mess.

Update: I got this response from SCC spokesman Ken Schrad:  “Given the extensive amount of changes needed to include the ACA requirements, the Bureau of Insurance advised insurance companies that it believed it would be easier for consumers to understand if a new policy were issued rather than rewriting the old policy.  The Bureau of Insurance did not have the legal authority to force insurers to allow consumers to keep their old plans without bringing them into compliance with the ACA.  The sale and issuance of these old plans would violate the ACA.

“To the extent the President’s announcement creates the possibility that insurers may be able to offer non-compliant plans for an additional year, the Bureau of Insurance will evaluate that possibility, including whether it comports with state law passed to comply with the ACA.”