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Canceled U.S. health plans are disruptive part of reform: Cigna CEO

By Caroline Humer

(Reuters) - The hundreds of thousands of Americans whose individual insurance policies will be canceled as Obamacare takes full effect next year are experiencing a disruptive element of healthcare reform, the head of health insurer Cigna said on Thursday.

In the past week, reports of pending plan cancellations have become a political problem for President Barack Obama, who promised years ago as he was pushing to pass the healthcare law that Americans who liked their health plans could keep them.

While that remains true for most people with insurance, a small percentage of the 17 million Americans with individual policies are now getting notice that they will terminate next year because they do not comply with new benefits required by Obamacare.

Many insurers are offering new, compliant policies to replace those that are expiring, but they may be significantly more expensive.

Nearly half of U.S. consumers with individual health plans are also expected to qualify for tax credits to buy insurance on new state exchanges under Obamacare.

"When you are that individual who has a benefit plan and it's working for you and your family at your current life stage and you are told that you no longer have that choice, that's disruptive and that's the environment that as a country we are going through right now," Cigna Chief Executive David Cordani said in an interview.

Cigna had about 232,000 people in individual policies at the end of September, according to company filings.

Competitor WellPoint Inc, which operates 14 Blue Cross Blue Shield licenses including the Anthem and Empire brands, has about 1.8 million people in individual plans.

Aetna Inc, which bought smaller insurer Coventry earlier this year, has 650,000 members in these plans and will drop about 50,000 members when it exits the California market at the end of this year.

In defending the healthcare law on Wednesday, Obama said it was not to blame for the plan cancellations, and that the real fault lies with "bad apple" insurers who were allowed to sell cut-rate policies that offered minimal coverage for people when they needed them the most.

Cordani declined to comment on Obama's remarks, but noted that individual plans have been subjected to numerous new requirements under the law. States determine the minimum eligible benefits and there are federal requirements, so in some states elements such as the size of the deductible could disqualify an individual plan for 2014.

"It's as simple as that," he said.

WellPoint and Aetna declined to comment on specifics about policy cancellations or about the president's comments.

Cordani said that Cigna has a small individual insurance business and is not significantly impacted by needing to cancel these plans. In addition, it has about 125,000 employer-sponsored plans that will end on January 1, 2014 because they do not comply with the law.

These plans typically targeted seasonal or hourly workers, he said, and it was clear from when the health reform law was passed in 2010 that they were going away.

(Reporting by Caroline Humer; Editing by Michele Gershberg and Cynthia Osterman)

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