With one small fix, the administration could satisfy calls from some members of Congress to extend the time people have to enroll in new health insurance through online marketplaces, a health policy expert says.
Photo by robstephaustralia via Flickr
The fix would not create problems in the industry and would move the deadline to a point when many people have a little extra money, says Brian Haile, senior vice president for health policy at tax preparation firm Jackson Hewitt.
Haile says pushing the current March 31 deadline to April 15 would ensure more people have cash from tax refunds to buy insurance – and would not really change the effective date of coverage beyond the current deadline.
That’s because there is a mid-month cutoff for coverage to begin on the first day of the following month. Policies for those who sign up at the end of March or on tax day would be the same: May 1.
While no specific new open enrollment end date has been proposed by lawmakers, several members of Congress of both parties are considering legislation amid the ongoing difficulties with healthcare.gov, the federal insurance website operating in 36 states.
Insurers are generally opposed to an extension, saying they based their premium rates for next year on the idea that the enrollment period would end March 31. Delaying the penalty for not having coverage or extending the open enrollment period could result in higher premiums in the future, the industry’s trade lobby has warned.
Actuaries say that insurers assumed in their premium calculations that most people would sign up by mid-December for coverage to begin Jan. 1, granting them an entire year of premium revenue.
Insurers also are concerned that the problem-plagued federal healthcare.gov website has increased chances that the people who soldier through the hassles of enrolling are likely to be those with costly medical conditions who were shut out of coverage previously. Healthy customers are needed to balance the risk – and cost — in the insurance pool. Add to that the talk of extending enrollment deadlines, and insurers see more revenue slipping away, eaten up by medical inflation and fewer months to collect premium payments during the year.
Looking at expected medical inflation for next year, every month’s delay probably corresponds to an average of two-thirds of 1 percent higher cost for the insurers, said David Axene, fellow of the Society of Actuaries. “That starts to creep into the amount of margin built into rates.”
Haile, a former director of the Insurance Exchange Planning Initiative of Tennessee, argues that granting a short enrollment extension could help insurers pick up additional younger or healthier consumers. Some of those customers may have been sitting on the sidelines because they are strapped for extra cash until they get their tax returns.
Insurers “are not going to lose revenue, but will pick up some young invincibles,” Haile said.
Although federal officials are not talking about changing the enrollment period – they see getting the website fixed as the top priority — the administration has moved to resolve an issue about timing. The problem was that even though the law allows the enrollment season to continue until the end of March, anyone purchasing a policy after Feb. 15 would have faced a penalty. So the administration granted an extra six weeks for people to avoid a penalty in 2014 for not having coverage. The tax penalty is $95 or 1 percent of household income, whichever is greater.
This post was updated on Nov. 8 to correct the monthly estimate of what a delay in implementation would cost insurers from 2.3 percent to two-thirds of one percent.