The ACA and Special Enrollment Periods

Bruce Japsen at Forbes reports that ACA insurers are doing quite well with the special enrollment periods:

 

“We think marketplace will continue to be a growth engine,” Michael Neidorff, the chief executive officer of Centene, the nation’s largest provider of individual Obamacare coverage told analysts last week on a call to discuss the company’s first quarter earnings. “Based on data released by (the Centers for Medicare & Medicaid Services), Centene is a clear leader in new enrollment on the federal exchange. And since the beginning of the year, we have enrolled over 320,000 new members in our marketplace product.”

Molina Healthcare also reported first quarter earnings last week and chief executive Joseph Zubretsky told analysts the health insurer’s “marketplace membership grew by 302,000 in the quarter to 620,000, exceeding our initial forecast of at least 500,000 members.”

We are not hearing a whole lot about adverse selection from these insurers. Instead, we are seeing behaviors that seem to indicate that the people who are enrolling are healthy as a horse and cheap to cover. I have heard from multiple sources in multiple states that work with multiple insurers that agent commissions are increasing, application bonuses are being given out and efforts to find new enrollees are being richly rewarded. Several years ago, insurers worked extremely hard to NOT enroll people during the off-season. Now they are trying very hard to enroll people in the off-season.

Some of this is changes in risk adjustment which leads to short-year enrollees being worth more in the risk adjustment formula. Some of this is likely do to a much higher gross premium level and gross margin level. Some of this is due to the zero premium plans available to the under 150% FPL crowd due to ARA passing.

I also think a lot of it may be attributed to the idea that adverse selection where someone knows that they have a big expense coming up but doesn’t enroll until the month of the big expense requires people to pay a whole of attention.

I don’t think that assumption holds up well for the current new enrollees. We have two classes of new enrollees. The first is the “typical” SEP enrollees where something happened to their life such as marriage, divorce, job change etc. These folks are likely to be similar to other traditional SEP enrollees in the amount of attention that they are paying. The one big difference is that the extension of COBRA subsidies for six months likely pulls out a lot of people who would have enrolled due to job loss leading to coverage loss. We may have to worry about adverse selection here, but risk adjustment should do a decent job of picking up these folks.

The second class of new SEP enrollees are people who had the opportunity to enroll in coverage in December but did not. They either made a willful calculation that the value proposition was not good enough or they had no idea what was happening. If it was a value proposition decision, the new ARA subsidies improves the value proposition. This would imply that that segment of new enrollees are likely to be very healthy. If it is an awareness problem, the increased salience of health insurance through positive political messaging and the combination of earned and paid media might move people to enroll. Again, people who marginally were not paying enough attention to do something are now paying enough attention to do something.

I want to see claims after a year, but I think that adverse selection in this situation is likely a minimal concern.