Two conservative health policy wonks are outlining an auto-enrollment option that is philosophically aligned with what is in the Collins-Cassidy draft bill state option. I don’t have an intrinsic problem with auto-enrollment with an opt-out. I have a major pragmatic problem with their proposal. But let’s look at the core of their program:
Congress should also help policyholders avoid breaks in coverage. Lawmakers could require insurers to offer products whose premiums match the value of the federal tax credits. If the basic, age-adjusted federal tax credit for a 40-year-old man in a given state is, say, $3,000, then every insurer in the state would have to make a policy available for such customers with a $3,000 premium.
Insurers would adjust the upfront deductibles in these plans as necessary to ensure that the premium equals the credit….
As with other benefit programs, many Americans wouldn’t use the credits for which they are eligible, out of inertia or lack of information. To solve that problem, the states could automatically place eligible households into the no-premium option, randomly assigning them to one of several competing insurance plans and then notifying policyholders of their coverage.
They are identifying a real problem with a reasonable way of minimizing the problem. Recent estimates have the Medicaid Woodwork effect contributing to 30% of the total decline in uninsurance i 2015. The Woodwork Effect is when people who were eligible but not signed up for Legacy Medicaid hit the Exchanges as health insurance enrollment became a major topic of public discussion and found out that they were always Medicaid eligible. This happened in Expansion states, it happened in non-Expansion states, it happened in Red states, it happened in Blue states.
I have a major pragmatic objection to their program design.
How do we figure out who is not otherwise covered in any given month?
The entire non-employer sponsored insured, non-government sponsored insured group can be roughly divided into four groups. The first is non-documented immigrants, this plan most likely will exclude this cluster for political reasons. This would not be a major change.
The other three groups are the problem.
The first group are people who will be in good health but need insurance on the individual market for a long time period. This group are the artists,the consultants, the very small business owners, the people who are fairly reliable buyers. If they were healthy, this class was in the individual market in 2009. They may switch carriers for cost and network purposes but they actively participate in the market year over year.
The second group is also a group that was in the individual market in 2009. It is people who just need some coverage until something better came along. When I was laid off in 2009, my wife and I bought a catastrophic policy that covered us for a few months until we were able to get back onto employer sponsored coverage. My daughter was on that policy for two months until we got her on CHIP (best insurance I’ve ever had, great network, low premium, no stress). These are the policies which function as holding areas until something better comes along.
The final group in the ACA individual market are people with significant health conditions who were previously underwritten or priced out of the market. As a cohort, these individuals are also very stable in participation. A hemophiliac or an individual with MS will make sure that they sign up for coverage as they burn through any deductible by the third week of the policy year.
The first and third groups aren’t a major source of my pragmatic objection. The second group is a major source.
For relatively healthy people who are mainly insuring against catastrophic expense (hit by a meteor coverage) they are likely to churn. With an auto-enrollment system some level of government will need to track eligibility of every single potential covered life on a day to day basis. If someone is laid off on the 14th and their employer has a coverage cut-off on the 15th of the month, are they covered if they have a heart attack on the 16th? They probably would be on a retrospective claims basis but coverage churn is a major concern unless there are either massive back ends claims reconciliation for retrospective eligibility, states absorb the first sixty days of costs of a patient who is not part of a prospective assignment, or some other churn identification.
There are work-arounds but the pragmatic challenge of churn is real and it is big.