With 1 million Californians facing cancellation of their health insurance, state officials and the insurance industry were sharply divided over President Obama’s call to let consumers extend their policies.

And the state agency on the spot, California’s health insurance exchange, was noncommittal on what exactly it will do for affected policyholders.

Health insurers in the state warned that abruptly reversing course — and doing what Obama wants — could undermine California’s new insurance marketplace and trigger more rate increases.

California Insurance Commissioner Dave Jones, meanwhile, dismissed those concerns and called on the independent state exchange, Covered California, to immediately fix the problem and grant consumers more time. Jones said the exchange should support Obama’s new policy and remove a contract provision that requires insurers to cancel most individual policies as of Dec. 31.


“Since the federal government promised Californians could remain in their current health insurance it was a mistake to require those policies be canceled,” Jones said. “These cancellations are totally unnecessary and avoidable.”

Even if Covered California endorses Obama’s plan, insurance companies don’t have to go along and offer extensions into 2014 or beyond. Across the country, policies are being canceled because they don’t meet all the requirements of the healthcare law. This has sparked an uproar among consumers who cited Obama’s repeated pledge that they could keep their health plan if they liked it.

The state exchange said it is still determining how to proceed.

“We are assessing the impact and analyzing our options on how Covered California will incorporate this modification into our existing policy and direction,” spokeswoman Lizelda Lopez said.


California insurers objected strongly to changing the rules with just six weeks left in the year, and some companies suggested that extending old policies could run afoul of state laws implementing the Affordable Care Act. They urged California to follow the lead of other states, such as Washington, where the insurance commissioner Thursday opposed Obama’s move and ruled out extensions.

In the past, Peter Lee, executive director of Covered California, had defended the state’s Dec. 31 cancellation requirement because of concerns that insurers would renew their healthier customers for most of 2014, keeping them out of the larger risk pool that will shape future rates.

Patrick Johnston, president of the California Assn. of Health Plans, said there could be additional increases in premiums because “the exchange would be unbalanced with a pool of older, sicker people.... The entire underlying premise of the Affordable Care Act — balancing costs of the young, old, sick and healthy — has been left adrift with this announcement.”

Meantime, the clock is ticking on policyholders with canceled health plans such as Mike Caudill.


Caudill, a small-business owner and father of two children in Temecula, is hoping the state and his insurer, Anthem Blue Cross, will let him hang onto his policy. He said he was surprised and angered at getting a termination notice.

He pays $768 a month now for his family, and a comparable policy from Anthem next year could cost him about $800 a month.

“I thought I was protected,” Caudill said. “If the state says no, I will take issue with that.”

Until now, only consumers who purchased individual policies before the healthcare law was enacted in March 2010 had grandfathered status, shielding them from most of the changes under the healthcare overhaul.


chad.terhune@latimes.com

Twitter: @chadterhune