This is a quarter baked idea. 

I was talking through a research project yesterday with a co-author.  There was a mention that re-enrollment algorithms put people into bad plans at time.  By bad we meant plans where strict domination was occurring where for the same insurer and network, a person was being defaulted into a plan with worse benefits and more expensive premiums.

This is a wedge for states to fund Section 1332 waivers if they operate a state based marketplace.

Coleman Drake, Petra Rasmussen and I estimated in 2021 the incidence of automatic re-enrollment algorithms placing people into strictly dominated plans.

5.8% of 748 087 California marketplace enrollees currently default to dominated health care plans with higher premiums and cost sharing; more than 98.0% of enrollees have low incomes. By comparison, an alternative smart default system would default many enrollees to more generous plans with approximately $100 lower monthly premiums and almost $2000 lower deductibles.

About half of this action were people in Bronze plans who were eligible for zero premium Silver CSR plans.

CMS updated the automatic re-enrollment algorithm in 2024 to move people who had zero premium Bronze plans to zero premium Silver CSR plans. This moves low income folks from plans with $8000 or $9000 deductibles to plans with $300 to $1200 deductibles.

States may have a policy wedge here. States can apply for Section 1332 waivers where they can modify their markets to suit local needs as long as coverage is provided for at least as many people, at least as affordable, at least as comprehensive and does not contribute to the federal deficit relative to the non-waiver guidelines. If a state saves the federal government money, that money is “passed-through” to the state to contribute to the Section 1332 goals. The dominant approved waiver has been reinsurance.

States can elect to use Healthcare.gov, run by the Centers for Medicare and Medicaid Services (CMS), or operate a state-based marketplace like Pennie in Pennyslvania, or Covered California or CoverMe in Maine. More states are electing to run their own marketplace as CMS under the Obama, Trump and Biden Administrations have made it clear that there is little customization capacity of Healthcare.gov to fit local state needs.

A state with an SBM could file a waiver where they would change the automatic re-enrollment algorithm so that enrollees with incomes over 150% FPL with strictly dominated plans as previously defined, would be placed into superior plans whose premiums were below the benchmark plan. Enrollees, would, as aloways have the option to opt-out of the default re-enrollment option. However the enrollees who did not opt out would reduce the amount of federal subsidy paid in the cases where the newly designated plans were zero premium plans. [in 2018, CMS has thought about metal choice selection factors for the Basic Health Plan financing so the concept is not new to them] This creates a small wedge of federal funds that could pass through to the state.

And those funds could be used to buy down de minimas premiums or non-EHB benefits or reduce deductibles by funding small state-funded cost-sharing boosts like New Mexico and Massachusetts. We can improve the value of coverage by reducing dumb choices in states that operate their own markets.