Under the Affordable Care Act, once open enrollment has ended, an individual may still be able to purchase though a special enrollment period (SEP). The SEP usually occurs when that individual has a qualifying life event (QLE). Involuntary loss of health insurance coverage, marriage, child birth, and move to a new state are all examples of QLE’s.
In the past, when a Indiana resident, U.S. citizen or legal resident went to the market place for a new policy, there was almost no reporting requirements to prove you had a QLE. Essentially people would enroll into health plan whenever they wanted. Most situations occurred when they needed medical attention. This segment of enrollments has become a serious issue with the insurance industry.
The first issue, is the high utilization of claims that these members accounted for. These enrollments represents less than 1/3rd of total membership, but they account for 50% of total claims. The health insurance industry has been scrambling to try to stop these losses.
The second issue, which is far more complicated is the insurance carriers assessing risk to their membership. Under the ACA, insurance companies have to estimate what their risk is and report that to the government. This is an extremely complicated equation. If the insurance company is wrong on the risk, they could end up paying or receiving money from the risk corridor program. With the SEP enrollments, the insurance companies are having a hard time assessing risk to report to the government. The insurance industry needs/wants a full 12 months of coverage to determine that risk. Without accurate risk assessment, the insurance companies are losing money/funding from government programs.
Out of the SEP enrollments for 2014 & 2015, the data that has been analyzed has shown a large amount of enrollments that were not qualified. This is not a small amount, it is estimated that 45% of SEP enrollments were not qualified enrollments. A step deeper, shows that 20% of the SEPs may have been flat out fraud.
Insurance Industry Actions
The health insurance companies participating in Indiana and the rest of the county, have tried to slow down enrollments. They have actually been successful. They have limited their distribution channels to only healthcare.gov. Carriers have stopped compensation on all channels and even removed their in house agents.
The large insurance companies have petitioned CMS to allow them to police the SEPS enrollments from the exchange. It remains to be seen if CMS will allow them to do this. Government officials may not have a choice, if they wish for the large carriers to stay in the exchange markets. The insurance companies have processes for SEP proof for off the exchange policies. You have to send them the proof that you had prior coverage and when it ended. Where there might be issues is on unusual circumstance, where there is not a clear definition if the situation is QLE or not.
The Market Place
The federal exchange has started to require proof of QLE. The issue for the insurance companies, is the poof of the QLE is not required until after the policy is in place. Usually supporting documentation is not due until 90 days after the policy is in place. This could create more abuse of the system and leave the insurance industry holding the bill.
With the insurance companies currently losing money in the individual exchange market, they are scrambling to stop the losses. If CMS refuses to address the SEP issue, we could see insurance companies drop out of the exchange market.