The Affordable Care Act individual health insurance market is likely to be open for enrollment for most if not all of the year.
NEWS: The special enrollment period for the federal health insurance marketplace is extended from May 15 to August 15, @SecBecerra announced today during a visit to Carson City.
— Jazmin Orozco Rodriguez (@jazmin1orozco) March 23, 2021
At some point, I think we should have pity on the actuaries and the enrollment departments of the insurers and just say that open enrollment is going to be open for the entire year.
There are two policy points that need to be made.
The first is that the ACA insurance plans are designed on an annual basis. A Gold plan with an 80% Actuarial Value on January 1st is not effectively an 80% AV plan if it starts on July 1st. The July 1st policy has the same cost sharing that needs to be filled in half the time. The effective actuarial value of a Gold designated plan that starts on July 1st is way less than 80%. Over the course of the year, effective actuarial value declines. Plans that are heavy on deductible and light on co-pays and coinsurance see bigger declines in effective value over time.
Secondly, 2021 is going to be mispriced. Some insurers are in a position to see huge risk adjustment outflow shocks. Some insurers are going to be rolling in the dough. Medical Loss Ratios (MLR) rebates are going to get another big boost for some insurers this year as 2019 was notably overpriced, 2020 was COVID with weird utilization, and now 2021 made have positive risk adjustment shocks and the insured pool is likely to be healthier and exposed to cost-sharing for a larger proportion of costs over the contract year. MLR rebates go to the contract holders of the paying insurer in the last year of the rebate cycle. This means that insurers will be making MLR rebate checks for 2019-2021 in the summer of 2022. With ARA upping the subsidy schedule, there will be a large number of individuals who will be paying nothing in net premiums and receiving checks from their insurer. This is weird. We should not be paying people to get insured through a convoluted bizarrely structured one way risk corridor especially when the federal government is paying all or almost all of the actual premium. Congress should look at restructuring the MLR rebate so that no one gets more of a rebate than their net premium and the rest returns to the Treasury.