Thursday, August 07, 2014

If you like your ACA plan, you very likely won't be renewing anyway

Sam Baker and  Jonathan Cohn have both spotlighted a Milliman briefing paper warning of an important potential glitch looming as the ACA's second Open Season approaches. It's this: while the government is encouraging current customers to renew their current plans via auto-enrollment, many customers may see significant price spikes if the plan they selected last year loses its status as a "benchmark" plan.

Subsidies are keyed to the second cheapest silver plan in each market, deemed the benchmark; subsidized customers who buy a plan more expensive than the benchmark have to pay the whole difference. Thus, if the ACA affordability formula decrees that you should pay $30 per month for a benchmark plan with a base premium of $300, and that plan's premium spikes to $350 and it cedes its benchmark status, you'll now be on the hook for $80 per month rather than $30 if you stick with it. To stay at roughly the $30 level, you'll have to switch to one of the two cheapest silver plans on offer this year. (Additionally, if the benchmark plan price goes up, customers' advanced premiums may also go up if they re-apply rather than auto-enroll.)

I wouldn't dream of downplaying this very important potential glitch. But I think it's worth noting an often-unnoticed market factor that will mitigate its impact somewhat: there's tremendous churn in the individual market, and it's likely that half or more of those who enrolled in private plans in 2014 will be looking to renew. Many will have found jobs that offer insurance; some will become eligible for Medicaid; some will marry or move and need to select a new plan in any case. In November 2013, healthcare scholars Rick Curtis and John Graves estimated (with some caveats) that just 42 percent of Americans eligible for subsidized exchange coverage at end of 2014 (i.e., the upcoming open enrollment season) were eligible in the prior year. That doesn't quite tell us what percentage of those currently enrolled in subsidized exchange plans will not be seeking coverage for 2015, but it gives an idea of the degree of turnover.

Others who won't be affected by this potential disproportionate price hike include those whose current plan doesn't lose benchmark status, those who bought plans that were not benchmark plans, and those who have established relationships with ACA navigators or with brokers (most of whom report they're still hearing from customers who need help using their current plans) and reach out to them before re-upping.

None of which is to suggest that this problem doesn't potentially affect a large number of people. The administration should do its utmost to ensure that exchanges, e.g. healthcare.gov, spell out for existing customers what they'll pay if they renew their current plans (Milliman warns that at present they're not required to -- they need only spell out the subsidy amount, which is not the customer's bottom line).  HHS and the states should also do everything possible to alert navigators, Certified Application Counselors, and brokers to the problem. For brokers, who were instrumental to getting the uninsured signed up in California, alerting customers of plans that lose benchmark status could be a business opportunity.  Switch or pay!

P.S. Milliman does note, "Consumers will also receive a notice from their current insurers regarding their 2015 net premium contributions based on the 2014 subsidy dollar amount." Since the subsidy itself will not go down if the customer's income hasn't increased, that seems a pretty significant safeguard -- though healthcare.gov's auto-renewal process, which states are encouraged but not required to follow, may induce some to miss this information. And as Milliman notes, Medicaid precedent indicates that many will pass up the opportunity to lower their payments through "redetermination," i.e. a new application.

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