On June 8, 2016, the Department of Health and Human Services announced that it is taking actions to improve marketplace coverage. How? The department plans to improve the marketplace “risk pool” by implementing changes to coverage and confirmation processes. In this article, HealthMarkets reviews the marketplace risk pool, changes proposed to short-term health insurance, and process changes (including changes to special enrollment confirmation).
HealthMarkets Reviews Risk Pools
All insurance companies use risk pools. For health insurance, “risk pools” describe the overall health of everyone enrolled in a qualified health plan (QHP). The public marketplace and individual health insurance companies review risk pools as a form of cost management. If the majority of enrollees are healthy, health insurance companies can afford to cover the higher costs of covering unhealthy people (like those with pre-existing conditions) also enrolled in their plans. However, if the majority of enrollees are unhealthy, then an insurance company will have more difficulty managing costs given the public’s demands for low premiums.
So, how does the risk pool affect you? Well, a healthier risk pool means insurance companies can lower the overall cost sharing passed on to the consumer. This means lower premiums, copays, coinsurance, and/or deductibles. On the other side, a risk pool that does not have enough healthy people will force insurance companies to increase premiums, cost sharing, or both.
Unbalanced risk pools don’t just affect the price of your coverage. They may also lower the availability of plans offered in your area. For example, UnitedHealth Group has announced that they will only offer marketplace plans in a “handful of states” in 2017. Despite being one of the biggest health insurance providers in the U.S., the size of the market (small) and increased cost of customers (an unhealthy risk pool) led to their difficult decision.
The Current Risk Pool Is Unbalanced, But Changes Are Coming
Consumers are seeing rate hikes. Some insurance companies are seeing dramatic losses and pulling out of the marketplace, which ultimately limits coverage. The current risk pool is viewed by some as so unbalanced that the marketplace itself seems unsustainable. That’s why the Department of Health and Human Services (HHS) is making changes. Below, HealthMarkets reviews each of the proposed changes:
- Limit short-term health plans
- Clarify the special enrollment process
- Update the risk adjustment program
- Improve the Medicare transition process
- Reduce data matching issues
Limiting Short-Term Health Insurance Plans
Short-term health insurance plans are not QHPs, meaning they lack minimum essential coverage. Short-term plans are also not required to cover pre-existing conditions. Because of this, only healthy individuals are usually approved for these types of plans. A healthy risk pool and limited coverage make short-term plans extremely affordable, although they do not make you exempt from the individual mandate’s tax penalty.
Currently, short-term plans can be purchased for 1-12 months. At the end of the chosen term, the policy can be renewed. In theory, healthy individuals could use a short-term plan year after year. However, short-term health insurance was never designed to be a permanent solution to coverage. And HHS is trying to put an end to people overusing short-term plans.
Why? HealthMarkets reviews a few of HHS’s reasons:
1. Short-term plans don’t offer any of the regulations or consumer protections set by the Affordable Care Act (ACA).
2. Some insurance companies are selling short-term insurance plans as the consumer’s primary coverage for up to 12 months.
3. Healthy people who elect to use short-term health insurance are not wading into the marketplace’s risk pool, which increases costs for both insurance companies and consumers.
So, what is HHS planning to do about short-term health insurance? If the proposal is approved, short-term plans can only be offered for 3 months or less and cannot be renewed. Insurance companies will also have to inform their customers that short-term health insurance does not meet minimum essential coverage guidelines, is not approved by the ACA, and will not make them exempt from paying a tax penalty. Ideally, these changes will make short-term plans fulfill their intended purpose while improving the marketplace risk pool.
Clarifying the Special Enrollment Confirmation Process
Unfortunately, HHS has seen a number of people taking advantage of special enrollment periods (SEPs). To cut back on misuse and ensure those who really need SEPs can still use them, HHS has decided to implement an SEP confirmation process. The new confirmation process would require SEP enrollees to provide documentation proving they are truly eligible. A marriage certificate, for example, would need to be submitted if an SEP was triggered by a recent marriage.
HHS has also clearly defined the 6 limited circumstances that will qualify individuals for a special enrollment period. The qualifying events will now be explained in detail during enrollment. HealthMarkets reviews the 6 circumstances as stated by HHS:
1. The loss of other qualifying coverage—must provide documentation
2. A change in household size due to marriage, birth, or adoption—must provide documentation
3. A permanent change in residence (with limitations)—must provide documentation
4. A change in eligibility for financial assistance (with limitations)
5. Specific errors made by marketplace or individual plans
6. Other individual cases (like switching between Medicaid and the marketplace)
Updating the Risk Adjustment Program
These changes have less to do with you, the consumer, and more to do with insurance companies, so we’ll keep this HealthMarkets review short. Changes to the risk adjustment program will reward insurance companies for designing products that meet the needs of all customers rather than just the healthy ones. According to HHS, “these changes include better modeling of costs for preventive services, changes to the data update schedule, and earlier reporting of preliminary risk adjustment data where available.” As far as it affects you, the change will better protect your access to multiple, comprehensive options.
Improving the Medicare Transition Process
Once someone turns 65, it is expected that they will end their individual or marketplace coverage and enroll in a Medicare plan. If they don’t, their coverage could raise the overall costs for other enrollees, not to mention that there are financial penalties for waiting too long to sign up for certain parts of Medicare.
HHS plans to help with the transition process. They want to begin contacting enrollees who are nearing 65, providing them with information on how to enroll in Medicare. They would also help Medicare enrollees end their marketplace plans.
Reducing Data Matching Issues
Last but not least, HealthMarkets reviews HHS’s plan to reduce data matching issues. The marketplace predominantly uses electronic data to verify eligibility for coverage and financial assistance. If the electronic data can’t be found, enrollees may be asked to provide additional information. If they do not provide the information or have trouble finding it, their coverage or financial assistance could change or be eliminated completely whether or not they are eligible. Because young, healthy individuals are less likely to complete the data matching process, the risk pool becomes more unstable because of a clerical issue.
Thankfully, this data matching problem is also being worked on. Improvements on both ends of the process (before the issue is generated as well as while the consumer is trying to fix it) look promising.
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