There had been a bit of a wonk debate on how much the Special Enrollment Period (SEP) process is being gamed by people to get coverage when they don’t actually qualify for it. People who know what they are talking about acknowledge that some gaming is going on, but most SEPs are legit. People who are convinced that PPACA is an illusion built upon sand and the entire edifice will collapse
in 2011, 2012, 2013, 2014, 2015, 2016, sometime in the near future are convinced that gaming is the dominant enrollment reason.
Now via Allison Bell, Covered California provides some real data:
In November, executives at UnitedHealth Group Inc. (NYSE:UNH) reported that the company was losing hundreds of millions of dollars on individual exchange business, in part because SEP claims were much higher than it had expected….
Covered California staff members talked to the managing actuaries at 12 of the exchange program’s 13 QHP issuers….
“some of the difference is likely attributed to individuals inappropriately claiming SEP events,” according to his presentation.
Nothing is proven, but, at the four major QHP issuers, actuary estimates of the average cost differential for regulars and SEP enrollees range from 0 to about 50 percent higher. Bertko said some types of enrollees who clearly are eligible for SEPs, such as newborn babies, are much more expensive to insure than enrollees who come in during the open enrollment period.
Bertko said some issuers have documented hundreds of cases of off-exchange applicants who first were denied coverage due to their not being able or willing to provide valid proof of SEP eligibility, then re-applying for coverage through Covered California and getting SEP coverage.
So what does this mean?
There is some gaming going on. The matched pair of the same individual getting rejected for a SEP off-Exchange and then being approved for a SEP on Exchange is clear proof.
Verification and validation requirements such as requiring submittal of marriage licenses or divorce decrees, or a bill with the new address will reduce some of this. Income changes can be validated by Covered California calling former employers and asking if Mr. Smith worked there between these dates and that his last salary was what was listed on the subsidy calculation.
Some SEPs will always be more expensive than normal enrollment. Babies are cute but they are expensive until they start walking. Validation requirements add a cost to acquisition so that will deter some healthy individuals who are eligible for validated SEPS to not go that route as the hassle is not worth it. The SEP pool should always be a bit sicker on average than the open enrollment pool.
Gaming is a problem. It is not the dominant problem as insurers who are complaining the loudest about it are the ones’ with questionable strategies in the first place. Putting in place modest verification steps will stop the most egregious gaming and increase the strength of the open enrollment period.