Obamacare’s Special Enrollment Period Creates Insurer Angst and Premium Increases

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June 15, 2016 by Harry Stoll

The plan to provide health insurance to every American is noble. But when held up to scrutiny, has providing health insurance without allowing insurers to underwrite for pre-existing medical conditions been a financially manageable prospect? To prevent a ‘death spiral’ of only insuring sick people once they learned they were ill—all people choosing a health insurance plan are supposed to do so during an annual open enrollment period of a few months (Nov, Dec, and Jan).

Unfortunately, Obamacare exchange insurers are discovering that all the taxpayer bailouts they’ve received (along with government subsidized premiums) may not be enough to pay claims for the sick and injured who enrolled in health insurance plans outside of the open enrollment window.

Typically, the open enrollment period for health insurance plans is annually in the fall through the end of January. Once the open enrollment period is over, those who did not pick a plan and pay for it are uninsured.  At least that’s how it is supposed to work.  But then, what happens when a person without insurance becomes sick or injured and the open enrollment window has closed?  For too many the answer is they enroll in Obamacare during a Special Enrollment Period, or SEP.

A SEP is designed to be open to people whose circumstances have changed, such as: getting married, having children, losing or changing jobs, divorcing, or moving to a new state. Up until this year there were 30 allowable circumstances that qualified people for a SEP in the Obamacare regulations—more than any other federal government program, including Medicare Advantage.

Rightfully, SEP’s are intended to help individuals seek coverage outside of the normal enrollment period due to certain life qualifying events. However, there is little or no oversight in place to ensure that SEP requirements are satisfied.  It appears as if Individuals simply need to check a box and they are granted a Special Enrollment Period for purchasing their health insurance.  The consequence?  SEP’s are enabling many to only seek coverage when they need care the most—a more costly proposition for the patient and the entire healthcare system.

As insurers obtain more experience on the exchanges they are finding that SEP enrollees cost 55% more in claims than those who sign up during open enrollment. Furthermore, SEP enrollees only stay enrolled on average of about 4 months.  This dumps claims on insurers without providing enough premium revenue to cover the costs.

“Insurance systems tend to get stressed when people can buy coverage when they know they need it and then drop it when they don’t,” Aetna CFO Shawn Guertin told the Associated Press in Feb. 2016.

Is offering and maintaining insurance plans under these conditions sustainable? Big insurers like Blue Cross Blue Shield are asking for large premium increases due to their well-documented exchange losses. United Healthcare is leaving the exchange business next year and Aetna has stopped offering plans in a couple states as well.  Additionally, many Obamacare Health Cooperatives are falling like dominos as they too feel the stress SEP’s have put on the system.

The Center for Medicare and Medicaid Services (CMS) recently unveiled several changes it said it was making to help close exchange enrollment windows. CMS has removed 6 of the 30 qualifying events that allow consumers a SEP.  Healthcare.gov CEO Kevin Counihan said in his Jan. 19 blog post that SEP’s will not be available for “the vast majority of consumers.”  He writes, “For example, SEP’s are not allowed for people who choose to remain uninsured and then decide they need health insurance when they get sick.”  Healthcare.gov operates public insurance exchanges in 38 states.

Health insurance companies are paying very close attention to how the government deals with SEP’s going forward. Will reducing the amount of qualifying events from 30 to 24 solve the unprofitability of plans purchased during SEP’s? CMS believes it will help some, but insurers are skeptical.  The insurers believe there are still not enough regulations in place.  They think the SEP window is still open too wide, even if it is closed a little more.

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