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“Direct Enrollment” in Marketplace Coverage Poses Risks for Consumers

March 15, 2019 at 10:15 AM

The Department of Health and Human Services (HHS) has proposed new rules that would expand “direct enrollment,” in which consumers enroll in marketplace coverage by using the websites of insurers and brokers instead of the federal HealthCare.gov site. The rule encourages navigators and others certified to provide impartial consumer help to enroll consumers through these private websites. Our new paper explains why direct enrollment could lead many consumers to buy substandard coverage or miss out on benefits for which they’re eligible:

  • Many insurers and brokers providing direct enrollment offer plans that don’t comply with standards under the Affordable Care Act (ACA), and they may benefit financially from enrolling more people in them. Some offer short-term health plans and other plans that don’t meet the ACA’s consumer protections and benefit standards. These substandard plans often pay brokers higher commissions than marketplace plans do. Federal rules bar direct enrollment entities from displaying substandard plans alongside marketplace plans, but some use screening tools to shift consumers away from marketplace options. For example, one broker’s listing of “Health Insurance” options often shows only non-ACA plans; the site lists ACA-compliant plans under “Obamacare Coverage.” Also, the sites’ screening tools collect personal and health information that’s irrelevant to enrolling in an ACA-compliant plan (such as pre-existing health conditions) but that insurers can use to target consumers for marketing substandard plans.
  • People eligible for Medicaid or other programs may face added barriers to enrolling. The marketplace has a “no wrong door” policy, meaning that consumers who go to the marketplace website can fill out one application and the website would route them to Medicaid, the Children’s Health Insurance Program, or marketplace subsidies based on the information they provide. But some direct enrollment websites divert consumers from the marketplace application process by not telling them that they might be eligible for other programs or by steering them toward non-ACA products. One insurer, for example, encourages consumers with Medicaid-eligible children to “buy a plan direct” from them, which bypasses the marketplace’s single streamlined application that would indicate their children’s Medicaid eligibility.
  • Direct enrollment websites don’t allow consumers to fully compare plans based on price and quality. Unlike marketplace websites, which allow people to compare all qualified plans on an apples-to-apples basis, direct enrollment websites don’t present all available marketplace plans or comparable plan information. One broker, for example, shows what appears to be a complete list of plans (“17 of 17”) available in a rating area, but that list only represents about one-third of the available plans.

Not all direct enrollment entities have all these problems, but the program lacks safeguards to protect consumers. And despite evidence that direct enrollment already poses risks to consumers, HHS’s recently proposed 2020 payment rule — an annual update to ACA marketplace standards — would expand direct enrollment further by allowing impartial application assisters to use it to enroll consumers.

These changes are consistent with the Administration’s larger effort to privatize more marketplace functions and reduce the resources, public presence, and capacity of the marketplaces themselves. That will hurt consumers by steering more of them toward plans that provide substandard coverage and away from ACA-compliant plans or no-cost public coverage.

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