Now that the 2016 health exchange open enrollment period has concluded and we look forward to implementation of the revised Special Enrollment regulation, this is an opportune time to improve the future functioning of the exchanges Special Enrollment periods.
The current structure in the federal health exchanges (exchanges) allows people to access health insurance when they need it to pay for health care services, and to cancel it when they don’t. While intended as a consumer protection, this loophole currently acts to punish participants who are responsibly buying insurance BEFORE they need it and holding it long term. We have a moral obligation to get health care to people who need it. But wreaking havoc on the exchanges is not the answer.
In late January, the Centers for Medicare and Medicaid Services (CMS) announced that it would eliminate six of the reasons people can use to qualify for a Special Enrollment Period (SEP). A SEP extends the time people can purchase health insurance through the exchanges. CMS called the reduction “initial steps,” and suggested it would look at additional actions.
Insurers, including the Blue Cross Blue Shield Association (BCBSA) and Aetna, had written to CMS requesting changes in the SEPs in order to make sure the health exchanges remain viable. BCBSA noted that consumers enrolling in SEPs use 55% more medical services than those enrolling during open enrollment. Aetna wrote that those enrolled during SEPs remain insured about half as long as those purchasing through regular open enrollment. Late last year, United Healthcare warned it may pull back from the exchanges in 2017, and cited challenges with the costs of individuals enrolling during SEPs.
America’s Health Insurance Plans (AHIP), the industry trade group, identified more than 30 reasons people can use to qualify for SEPs and wrote to CMS: “the current list … is expansive and is negatively impacting the overall risk pool of exchange enrollees.”
The basic premise of insurance is the pooling of funds from many to cover the costs of some. There are complicated methods for how to do this, but one fact remains consistent: for insurance to work well, people need to be in and stay in the insurance pool.
When too many people can opt in or out only when they need to cover the cost of health care services, there is no money left in the pool for those who have contributed all along. Premiums for everyone go up. The February 10, 2016 Wall Street Journal article, “Insurers Under Pressure to Improve Margins on Health Plans,” noted insurers are reporting additional losses relative to individual health insurance plans on the exchanges. It further stated that insurers were including significant rate increases and paring of product offerings for 2016.
What insurers and state regulators know, and the federal government is finding out, is that there is a fine balance between financial solvency, consumer protections and premium affordability. For insurance solvency, on-going plan participation is vital.
I believe we are confusing insurance with the moral obligation to get health care to people who need it. Both are vital to the long-term health of our society. But they are not the same thing.
While fixing this problem is not easy, there are options. We could place consumers enrolling in SEPs into special risk pools separate from the federal exchanges. These could be made available for this specific purpose, and monitored and managed by insurers. These risk pools existed in many states prior to the ACA. Another option would be to allow people to get refundable tax credits to pay for their health insurance, which equates to paying for health insurance through their taxes. The Conference Board’s Committee for Economic Development (CED), which I co-chair, recently published a paper on this topic: “Adjusting the Prescription: CED Recommendations for Health Care Reform.”
If we keep the SEPs, CMS should find ways to better validate requests for them, or require people prove their eligibility before insurance coverage begins. As AHIP wrote, we need to “avoid potential abuse to ensure a stable, affordable market for consumers.”
We need the federal exchanges to remain viable options for the millions of Americans now getting health insurance through them. One way to do that is to prevent the people getting their health insurance responsibly from having to shoulder the unfair burden of cost for those who only use them when they need them.