We were curious about the importance of auto-renewals for the ACA individual market. An auto-renewal happens when, at the end of the plan year, a person who did not make a choice to re-enroll in the same or a different plan for the next year is placed into a plan. This is fairly common. Healthcare.gov has their own hierarchy that prioritizes putting people in the same insurer and metal level. Covered California now has a similar set of rules, but for several years, they had a quirk. California would not auto-re-enroll folks whose insurers left the market. We took advantage of the quirk to find an answer for this question.
The short version is that auto-renewals are really critical for enrollment.
The longer version is that people who can auto-renew will show up in the next year’s enrollment file slightly more than half the time. People who can’t auto-renew will show up in next year’s enrollment file about a fifth of the time. It is a 30 percentage point difference even after we controlled for household and market characteristics.
This is a big deal.
Last January, the Department of Health and Human Services (HHS), published the draft Notice for Benefit and Payment Parameters-2020 (NBPP-2020) which is the ACA Exchange rulebook. It is published every year. There were two areas that HHS asked for advisory comments for action that would not occur until the 2021 plan year. The first was silverloading of Cost Sharing Reduction subsidies. The second was how to manage and prioritize the choices made in auto-renewals.
The practice of automatic re enrollment in the Exchanges gives rise to several concerns. Some consumers who are automatically re-enrolled in their current plan may be shielded from changes to their coverage, which may result in consumers being less aware of their options from year to year. There is a concern that automatic re-enrollment eliminates an opportunity for consumers to update their coverage and premium tax credit eligibility as their personal circumstances change, potentially leading to eligibility errors, tax credit miscalculations, unrecoverable federal spending on the credits, and general consumer confusion.
We seek comment on the automatic re-enrollment processes and capabilities as well as additional policies or program measures that would reduce eligibility errors and potential government misspending for potential action in future rule making applicable not sooner than plan year 2021.
Any automatic re-enrollment program is a matter of choice of priority. Not allowing automatic re-enrollment is a choice to optimize on more aware buyers making active choices at the trade-off of far fewer people being covered. The current Healthcare.gov rule set chooses to minimize disruption of coverage at a particular insurer while attempting to maximize enrollment. This choice comes at a trade-off of less than optimal choices as post-subsidy premiums are likely to bounce year over year and people will face January premium shock when a zero premium plan suddenly becomes a $100 per month plan due to changes in the premium spread of their auto-renewed plan, the old benchmark and the new benchmark. Other auto-renewal schemes are possible. Each of them will have their own trade-offs.
Our new research letter highlights that any scheme that forces people to make annual choices will lead to significant attrition and surprise coverage drops. Our research confirms CMS estimates with a different methodology and a different data set. Erecting administrative barriers will lead to significant enrollment losses.
** Drake C, Anderson DM. Association Between Having an Automatic Reenrollment Option and Reenrollment in the Health Insurance Marketplaces. JAMA Intern Med. Published online September 23, 2019. doi:10.1001/jamainternmed.2019.3717