Among the many challenges in year two of federal exchanges, the process of auto re-enrollment is bringing the potential of convenience and disruption, for both consumers and insurers.
"We are committed to simplifying the experience for consumers by allowing auto-enrollment," said Health and Human Services Secretary Sylvia Mathews Burwell earlier this summer, outlining the new system for the 36 state markets served by the federal exchange. "We are working to streamline the process for consumers wishing to remain in their current plan."
While the process may be simple for both plan members and exchange plan managers, all involved could experience some shocks -- depending on how members being re-enrolled react to premium increases, as Milliman actuaries Paul Houchens and Susan Pantely argue in a briefing paper.
After a lengthy, glitch-ridden online purchasing experience last time, many of the approximately 5 million enrollees in federal exchange plans may "choose the path of least resistance and be automatically re-enrolled," Houchens and Pantley wrote.
If they opt to go through the application process again, though, they may get a better dollar-value deal on their health plans through a higher premium tax credit subsidy.
Members who auto re-enroll will receive the same dollar-amount subsidy in 2015 as they did in 2014 -- and in "most cases, this will be less" than what they'd get if they complete the redetermination process, Houchens and Pantley wrote.
The big variable for insurers, one of the main risks, will be how many consumers decide to re-apply.
Even with more competition in many states, insurers that led the first open enrollment period with high membership could benefit from more consumers going through auto re-enrollment, although that's likely "contingent on the ability of these insurers to maintain or decrease current rates for 2015," Houchens and Pantley wrote. "Policyholders receiving notices that indicate no increase in premium are likely less inclined to shop for 2015 coverage."
Members seeing increases with auto renewal, however, might be inclined to go back and shop for a new plan, potentially from a new insurer.
Impact on policyholders
The federal exchange will be notifying plan members of the auto re-enrollment and list the current subsidy, while health plans will be sending their own notices, before the first day of the open enrollment, and list the required premium contributions, after the subsidy.
Regardless of how policyholders enroll for 2015, the final premium subsidy will be reconciled with their 2015 tax returns and they'll receive a refund to account for premium increases (or be asked to pay a bit more in taxes to repay an over-subsidy).
But in the short-term, premium increases of just 5 percent could be noticed in the pockets of new exchange members, particularly lower-income individuals and those aging into new age bands, and could send them back to the market to shop.
Increases could also sow dissatisfaction among plan members and possibly contribute to nonpayment and policy lapses -- exposing insurers to unexpected administrative costs and to claims disputes with providers.
"Pricing uncertainty combined with consumer price sensitivity will likely result in the exchange being more volatile for insurers relative to their traditional lines of business for many years to come," wrote Houchens and Pantley.
Insurers should inform members of the option to re-apply, the authors recommend, and "work with exchanges, brokers and navigators to "educate health plan enrollees on the ability to potentially lower net premium contributions in 2015 by going through the redetermination process."