We’re in the biggest open enrollment period of my lifetime. Open Enrollment is when people who don’t have a plan can get a plan and those who have a plan can change plans without penalty. Open Enrollment is a common feature in any non-NHS system including the German, Dutch and Swiss as well as the American commercial and Exchange operations.
Open Enrollment is an attempt to manage adverse selection. Open Enrollment creates uncertainty which insurance companies can statistically price instead of certainty. For instance, in a buy at any point environment, the rational thing for me to do would be to carry a very cheap catastrophic policy in order to cover me in case I get hit by a bus. However, if I go to the doctor on Tuesday morning for some strange bruising in my legs, and Wednesday afternoon, I get the “Congratulations, you have cancer” phone call, under a buy at any time scenario, my rational response would be to go buy the super platinum insurance policy. A limited open enrollment period will see people who get the “Congratulations you have cancer” phone call during the enrollment plan select the highest benefit but it guards against someone policy jumping six months later. It will also see someone who got the cancer call four months ago select the highest benefit level possible.
It is not a perfect filtering device, there is no such thing besides universal enrollment with either single payer or significant back-end risk transfer payments between multiple payers. But it is a decent device that forces people to treat health insurance as insurance against future risks instead of a cost-sharing pool for known events.
However, life changes, and this creates the concept of qualifying events. Qualifying events are situations that allow people to buy or switch policies outside of normal enrollment periods and to do so without penalties. The basic idea behind a qualifying event is dramatic life and family changes. When Kid #2 was born, he was a qualifying event as well as a pooping machine. When I lost my job several years ago, that was a qualifying event. When I got married to the best woman in the world (for me at least), that was a qualifying event. When my family moved three states, that was a qualifying event.
PPACA/Obamacare also uses the open enrollment system for risk management. The first year has an open enrollment period of six months (Oct. 1 to March 31, 2014). Going forward, the open enrollment period for the Exchanges will be 56 days in late Fall. However PPACA will also have the qualifying event criteria for people to buy on the Exchange outside of open enrollment. The qualifying events are the regular ones such as changes in jobs, changes in family size through marriage, divorce, births, adoptions and deaths, changes in location although a move across the street won’t qualify, but a move out of the designated selling/service area of the previously bought policy will qualify. Additionally, changes in previous insurance status will matter; if an employer drops coverage in July for his employees, that is a qualifying event or if a person makes too much now for Medicaid, that is a qualifying event, or if a person ages into Medicare, that is a qualifying event for people to get rid of their Exchange plan.