HHS on Tuesday extended the federal exchange's special open-enrollment period until Aug. 15.
The special open-enrollment period launched Feb. 15 in the 36 states that use the federal exchange to help people who lost their coverage due to the Covid-19 pandemic. The extension gives consumers an additional three months to change or sign up for new health plans in light of subsidy increases included in the recently enacted American Rescue Plan. Some state-run exchanges also have extended their open enrollment periods into August, and at least two—California and Maryland—will allow residents to purchase exchange coverage throughout 2021.
In any other year, we'd likely see insurers raising alarms over prolonged open-enrollment periods, as it opens the potential for people to wait to purchase coverage until they are sick, resulting in sicker risk pools. Past data also suggests individual market enrollees who purchase coverage during a special open enrollment period have higher care costs. But this is not your typical year. The health care industry is still navigating the pandemic, and insurers are not playing by the typical rules related to risk pools and adverse selection. As such, America's Health Insurance Plans and insurers have largely welcomed the special open enrollment period and the new consumers they could bring.
The general uncertainty around the pandemic and the prolonged special open enrollment periods raise key questions about the marketplace:
1. How will the Biden administration's exchange-related actions affect enrollment?
While CMS under President Trump focused on reducing federal spending on exchange subsidies, the Biden administration is doubling down on the Affordable Care Act (ACA) exchanges to reduce the uninsured population. The recently enacted American Rescue Plan fills existing gaps in exchange coverage affordability by temporarily expanding subsidies to those with annual incomes above 400% of the federal poverty level (FPL) if their premium costs are greater than 8.5% of their income. In addition, under the law, those with incomes from 100% to 150% of FPL are now eligible for fully subsidized coverage if they purchase a benchmark silver plan.
But what does all of this mean for enrollment? The Kaiser Family Foundation estimates that 1.4 million uninsured people are newly eligible for a subsidized exchange plan. The Congressional Budget Office (CBO) estimated that the subsidy changes would prompt 1.7 million people to purchase exchange coverage in 2022, including 1.3 million previously uninsured individuals. That would be a signficant increase on the 8.3 million people who selected a federal exchange plan for the 2021 coverage year, although it would still be below peak enrollment numbers seen in 2016 and 2017. But CBO's numbers do not take into account the fact that HHS is dedicating at least $50 million to promote the special enrollment period and $2.3 million to so-called navigators who help consumers sign up for exchange plans.
Industry analysts have long said that some of the estimated 57% of uninsured people who qualify for financial assistance under the ACA do not know they are eligible. The additional outreach could help fill some of those gaps. During the first two weeks of the special open enrollment period, 206,236 people signed up for new exchange plans, and we'll be watching to see how enrollment numbers progress.
2. How will a longer special open enrollment period affect insurer risk pools?
While a boost in enrollment is positive, having a lot of new, previously uninsured people coming in mid-year makes risk adjustment harder because insurers will need to account for any conditions they may have with little information or provider documentation. That's why insurers will be interested to know who these new enrollees are and how they will affect risk pools.
Insurers aim to enroll a mix of sick and health members to control premium costs (healthy members who use less coverage offset the cost of the sicker members who require more costly care). Prior to the Affordable Care Act, insurers were able to achieve this balance by denying coverage to those with preexisting conditions or raising costs for those individuals. In a post-ACA world, insurers cannot deny coverage to sick applicants and, therefore, have less control over their risk pools. The ACA put in place some forcing mechanisms to help address that concern, including a fixed open enrollment period to prevent people from signing up for exchange plans when they are sick and need coverage, and a financial penalty for those who remain uninsured, which was essentially eliminated under the Trump administration.
There is some initial good news for insurer risk pools. Preliminary data from state-run exchanges suggest that younger enrollees, who are typically considered to be healthier, are enrolling in coverage during the special open enrollment periods. But time will tell if insurers' 2021 risk pools are balanced or trend sicker or healthier.
3. What does the special open enrollment period mean for 2022 cost sharing?
One of the main arguments in favor of limited open enrollment periods is to ensure that insurance actuaries have reliable data to make cost projections for the next year's premium rates. Having a prolonged open enrollment period makes that trickier. As we noted above, a large influx in members midway through the year will make risk adjustment harder. But that is not the only complication; actuarial values do not hold their value throughout the year, meaning consumers who purchase coverage effective June 1 will have half the time to reach their deductible as those who purchased coverage effective January 1. That has implications for the data insurance actuaries will use to make cost sharing determinations for 2022.
4. How could the special open enrollment period affect the overall market?
For the past three years, the ACA's exchange marketplace has remained relatively stable. Premiums for the lowest-price silver plans declined from 2018 to 2020, while exchange plan competition has grown. This is all good news, and the fact that insurers are returning to the exchanges signals that the markets are expected to remain relatively stable. But it's likely the industry could see the effects from the pandemic and the prolonged open enrollment periods extend into 2022.
One thing is certain, the Biden administration is committed to shoring the ACA and the exchanges up. We'll be watching throughout the year to determine how the Covid-19 pandemic and special open-enrollment period impact the exchange and individual marketplace.