ACA open enrollment extension may injure insurers

Last week’s extension of the Affordable Care Act’s open enrollment deadline increases the risk of anti-selection, which will likely lead to higher than anticipated losses for insurance companies and higher premium rates in 2015, according to Moody’s. The credit rating and research group called the latest extension “credit negative” for carriers.

The Department of Health and Human Services said on March 26 it would extend the deadline for consumers to enroll in a health insurance plan under the Affordable Care Act if they started enrollment before March 31 but weren’t able to complete the application by midnight.

“Although the agency aims for the extension to apply to a limited number of situations, the reality is that anyone can claim they tried to enroll into the exchange before the deadline,” Moody’s analyst Steve Zaharuk says in the report, adding that HHS requires no documentation verifying enrollment attempts.

HHS also expanded the list of special circumstances that would qualify individuals to enroll in health insurance during the special enrollment period beyond March 31. This list now includes enrollment errors, misrepresentations and incorrect information displayed on the enrollment website.

‘Validation enough’

Kelly Fristoe, an insurance agent in Wichita Falls, Texas, tells EBA several people he tried to help enroll on March 31 were asked to provide a call-back phone number or email address to the marketplace when they weren’t able to access the website.

“I suspect that those things will be validation enough in and of themselves. But I also think that just about anybody will be able to verbally claim that they tried to apply — without having provided an email address or call back number — and be able to get enrolled,” he says.

Moody’s Zahurak says the more liberal extension of the special enrollment period may give individuals who were considering going uninsured, but suddenly find themselves needing medical care, an additional opportunity to enroll. This is a scenario insurers had not factored into their premium rates and as a result, may cause insurers losses to be greater than anticipated, he adds.

Fristoe agrees, saying the “honor system” allows for people now finding themselves in a state of compromised health to pick up the phone and get coverage. If this happens at a high rate, he tells EBA, “it will further deepen that ‘credit negative’ position for the carriers.”

Further, because insurance companies need to finalize their 2015 premium rates by summer, there is a limited amount of time for insurers to assess the medical status of late enrollees and set premium rates with those findings factored in, the Moody’s report says. Because of their projected losses from this business and increased wariness after multiple ACA extensions, Zahurak expects insurers to be more conservative in their premium assumptions and set higher premium rates for 2015.

Clare Krusing, a spokeswoman for America’s Health Insurance Plans, says that while it’s important to make sure people are able to get coverage, the new special enrollment period needs to be limited to a defined period of time with a clear end date.

“This helps to ensure there is an incentive for people to enroll. It is also necessary so health plans know who is covered as they develop and submit premiums for next year, which is required in some states as early as April,” she says.