Changes in open enrollments to come and evolving state and federal policies promise new uncertainties for insurers trying to soundly price their plans and retain membership.
This open enrollment period, the second in the new Affordable Care Act individual market, will likely be the last that runs from the fall into the benefit year, where consumers can switch plans after starting on one they were enrolled in.
With subsidies linked to the second lowest-cost silver plan and some price shocks being likely for those who don't switch year-over-year, consumers this year have had the benefit of being able to switch plans between January 1st and February 15. Those who were auto-enrolled in their 2014 plan only to see their premiums going up had more than a month to switch.
That will not be the case in the federal exchange next year and in 2017, whose open enrollment periods are set to run only from October through December. That in tandem with proposals by the Department of Health and Human Services raise some complex considerations for insurers, especially as reinsurance and risk corridors fade away, according to a new analysis by Milliman.
As of last December, the federal exchange auto-enrolled about 2.7 million Americans into 2015 plans, about 35 percent of the total federal exchange pool, including large swaths of the exchange memberships of 2014 exchange market leaders. Some of those consumers may have ditched the plans upon seeing the January premium, while others may have stayed put.
Either way, there are long-term implications insurers should watch for. The 2015 open enrollment "creates a unique dynamic for exchange consumers as well as insurers that may not be replicated in future years," according to Milliman actuaries Jason Clarkson, William Gibula and Paul Houchens.
"For insurers in the federal exchange markets," they wrote, "the rate changes experienced by those who auto-enroll in coverage (and elect not to switch plans prior to the end of the open enrollment period) may influence effectuation rates in the coming year, particularly for low-income households." With 2016 exchange premiums and financial projections already in development, "the prospect of a shifting enrollment base in January and February of 2015 presents an added degree of uncertainty in an immature market."
2017 changes looming
For one thing, HHS is mulling an idea for "alternative re-enrollment hierarchies" that diverge from the current approach defaulting consumers to their existing plans.
"Because we believe that many consumers place a high value on low premiums when selecting a plan, we believe that consumers could benefit from alternative re-enrollment hierarchies," federal regulators wrote in a proposal.
For the 2017 benefit year, "we are exploring implementing in the FFE an approach under which an enrollee, at the time of initial enrollment, would be offered a choice of re-enrollment hierarchies and could opt into being re-enrolled by default for the subsequent year into a low-cost plan rather than his or her current plan or the plan." The threshold for this opt-in auto-enrollment could be premium increases of more than 5 or 10 percent, HHS suggested.
If that is implemented, it could have some significant impacts on both consumers and insurers, noted Clarkson, Gibula and Houchens. To get a sense of the potential market dynamics, they modelled what would have happened if federal exchange consumers had used that kind of auto re-enrollment for 2014.
They concluded that "significant movement would occur between plans and insurers as a result of the low-cost auto-enrollment methodology." Under the 5 percent premium increase threshold for auto-reassignment, 55 percent of federal exchange enrollees would have moved out of plans if they didn't not re-enroll; 45 percent would have switched under a 10 percent increase.
Of those who would be automatically moved to a different plan in 2015, 87 percent would also be moving to a different insurer under either the 5 percent of 10 percent threshold.
"The low-cost auto-enrollment method is likely to further encourage insurers to restrict rate actions, as the loss in market share from exceeding the rate threshold, in either the 5 percent or 10 percent scenario, may be substantially greater than under the 2015 auto-enrollment process," wrote Clarkson, Gibula and Houchens.
"For insurers that entered the exchange market with a strategy of pricing aggressively initially to gain market share and later increasing rates, initial market share gains may be lost through the low-cost auto-enrollment process."
Some caveats, they noted, include the possibility that the exchange market could stabilize over the next three years, although there are also more uncertainties looking to 2017, which "could result in a much more diverse exchange market if states seek this path."
2017 will be the first year with only the risk adjustment program, the first year that exchange plans can be sold to large employers, and the first year that states can start implementing policies such as all-payer rate setting as part of the ACA's innovation waivers.