Ever since the PPACA was first being discussed, the individual mandate has been touted as a buffer to protect health insurance carriers – and in turn, policyholders – from adverse selection that would otherwise certainly occur in a guaranteed issue individual market. It seemed that as long as people were required to maintain health insurance coverage, adverse selection would be minimized and people would be unlikely to purchase health insurance only during periods of sickness. But there was still enough concern about adverse selection that HHS issued a proposal for open enrollment for individual health insurance plans starting next year. This proposal was released at the end of November, and the specific details regarding the open enrollment period are on page 70595 of this Federal Register.
To sum it up, they’re proposing an initial open enrollment for individual health insurance plans period that starts in October 2013 and runs through the end of March, 2014 (a six month window in order to accommodate the large influx of initial applications), and then open enrollment periods that mirror Medicare’s: October 15th until December 7th each year. Beyond that window, only “qualifying event” applications would be allowed for individual health insurance policies – both on and off the exchange. Qualifying events would be defined the same way they are today: things like marriage, divorce, loss of employer-sponsored health insurance, birth, adoption, etc.
The proposal from HHS questions whether it would be better to have one uniform open enrollment period for everyone (October – December), or whether it might make more sense to go by policy years and have open enrollments spread out throughout the year based on when a policy renews (for example, our own family’s health insurance policy renews in September each year, so that would mean that our open enrollment in a policy year design might be from August to October).
What’s the best way to structure open enrollment for individual health insurance plans?
My own thoughts on this are that if we have to limit the individual market to open enrollment windows, we should spread those windows out across the whole year rather than try to compress a year’s worth of applications into a six week window every fall. A summary of the proposed regulations posted on healthcare.gov simply says that “individuals generally would need to buy coverage during open enrollment periods.” but does not go into detail about how those open enrollment windows would be structured.
I think that a defined open enrollment for individual health insurance plans makes a lot of sense in terms of limiting adverse selection. The individual mandate is a good first step, but the tax penalties for not having health insurance are far lower than the cost of a health insurance policy, so some people might simply opt to take the penalty and forego health insurance. An open enrollment window helps to make this a less attractive option. But in terms of the logistics of millions of people shopping for health insurance at the same time – with limited human resources to assist them – I think it would be smarter to have open enrollment periods that align with existing policy years in order to spread out the shopping across the entire year (in addition to the qualifying event applications, which would already be spread across the year).