Whispering “Adverse Selection” to an actuary is a good way to increase their heart rate as their cortisol levels spike as a fear reaction. Adverse selection means that people who know that they are going to use a lot of expensive services/claims will sign up while the healthy/low cost folks don’t sign up. Community rated and guaranteed issue markets like Medicare Advantage and the ACA individual health insurance markets are substantial adverse selection fears. One of the controls to minimize selection is a limited open enrollment period (OEP). The ACA has anywhere from a six week (2018-2021) to a 6 month (2013) open enrollment period. Currently the ACA has a 10 week (November 1-January 15) OEP and the administration is proposing a reduction to 6 week ( November 1-December 15) for 2026.
During the OEP, anyone in any health condition can sign up for any reason and the policy will be sold and the policy will go live as long as the initial payment is made in a timely manner.
Outside of the OEP, there is a Special Enrollment Period (SEP) where people can sign up for coverage if they meet certain conditions. There is a big concern that people who enroll in the SEP are just sicker and more expensive than OEP enrollees. There are horror stories of individuals who need a transplant signing up in June and ending their coverage in September once they had a transplant. In 2016, CMS under Obama instituted a verification requirement on SEPs with the goal to reduce adverse selection.
Chatrath et al in Health Affairs Scholar looks at the impact of these new requirements on the health status and enrollment of SEP enrollees versus OEP enrollees in 2015 and 2016 for a single large national insurer. They look at predictable and deferrable services (joint replaces), predictable and not-deferrable services (pregnancy) and a general measure of health (heart attack and strokes). Appendicitis is included as a general measure of randomness as we would expect appendicitis to not be responsive to selection biases. In 2015 and 2016 they look at the adjusted probabilities that an SEP member has a certain service compared to OEP members. They then compare how these probabilities and their confidence intervals change over the two years and two policy regimes.
There is not much of a difference. There is a big point estimate decrease in childbirth predicted probabilities but the confidence intervals overlap while the AMI (heart attack)/Stroke category is pretty close to the same which indicates that SEP enrollees are just sicker. This makes intuitive sense as signing up for an SEP is a far harder/less pleasant process than signing up during the OEP. We would expect, using either an ordeal perspective or an administrative burden perspective, that the only people who will go through the process of an SEP are the ones who really really want/need coverage anyways. The increased paperwork and verification requirements don’t do a lot.
Yutsano
I will admit: I looked at AMI & it took me a lot longer to figure out than I really care to admit.
It almost sounds like SEPs are set up to encourage people to not sign up. Except in our stupid private insurance environment, people either do the SEP, pay out of pocket, or go without care. To almost anyone else on the planet this sounds really stupid. And then you have to convince them this was an improvement from the system that existed before! We really need to find something better after the Dolt47 interregnum.
TBone
@Yutsano: hard agree.
I enrolled at our State exchange early, at the first available opportunity. I have used my medical insurance precious few times because loopholes. For example, (of course non-covered) dentist referred me to an oral surgeon for a biopsy. Oral SURGERY biopsy not covered. No biopsy was performed and now I just try to forget that I need one.
StringOnAStick
As someone who had a couple of decades of insurance precarity before the ACA, and who feels like I won when I hit 65 and could get Medicare, I worry that the current wholesale destruction is going to so damage the ACA that it will be gone, and true “trade chickens for care” will be what we’re offered, but what it will really be is medical care only for the wealthy, the rest of you can just die.
TBone
@StringOnAStick: in my experience, we’re there already for the most part. Gold, Silver, Bronze “plans” hahaha. My “Silver” plan is almost a joke for anything but routine maintenance.
I long for the treatment Hubby gets on regular Medicare.
John Cole
@TBone: pls check your email.
gene108
My experience with SEP’s has been after being laid off and finding the ACA option more affordable than COBRA. The ACA plan choices are not as good as during OEP.
At least in NJ, SEP’s are only available after a “life event” where coverage is lost. SEP’s are set up to discourage people from hopping on insurance in June, getting a transplant, and canceling in September.
pluky
I was the LTD/STD (long/short term disability) pricing actuary for a large (~200K lives) employer group that, without telling us, offered an off-cycle, no pre-existing condition exclusions, open enrollment. Of course they came screaming to us when the experience went in the crapper. Why you might ask? The bulk of the excess came from maternity STD; both previously unenrolled, and prior enrollees who reduced their elimination period (the time between disability occurs and payments commence) to the minimum offered. Bottom line, childbirth may be non-discretionary, but getting pregnant for working women is usually a conscious, discretionary decision; one that can be influenced by external factors. Not surprised at the drop give above.
Kelly
Sorta related local problem: Regence, a major PNW health insurer, and Salem Health, the most sophisticated hospital and health provider outside of the Portland metro, are at a contract impasse. As a result 30,000 people are now out of network unless they travel an hour. Effective January 1st just after many folks are stuck for the year. Impasse is ongoing. Medicare Advantage folk could still change but I think ACA folk are stuck. Also some folks are stuck due to employer plans, although the employers ought to be firing Regence.
David Anderson
@pluky: OOOOFFFFFF