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Insurers’ Claims About Special Enrollment Periods Deserve Tougher Scrutiny

For months, insurers have claimed that people are abusing special enrollment periods (SEPs), which allow people to newly enroll in a marketplace health plan (or change plans) outside the regular open enrollment period if they experience a major life change such as having a child, getting married, moving, or losing other coverage.  Insurers won a major victory this week when the Department of Health and Human Services (HHS) announced new requirements for extra paperwork from people to seeking to enroll during an SEP.  But new data from the industry don’t support insurers’ claims.

Insurers say that many people using SEPs are either ineligible for marketplace coverage or use SEPs to enroll only when they know they need costly medical care and then rack up expensive bills and drop coverage soon after.   

The data show that a meaningful share of marketplace enrollees sign up during SEPs and that SEP enrollees have higher average claims costs than other enrollees.  The data don’t show that consumers are inappropriately using SEPs.   

The individual market has always been transitional as people move into and out of sources of coverage, such as job-based plans and Medicaid.  It’s not surprising that the life changes triggering an SEP often occur outside of open enrollment and that some people “churn” into and out of marketplace plans during the year.   

The real problem is likely that too few people use SEPs.  Fewer than 15 percent of those eligible for SEPs use them, the Urban Institute estimates.  That means the people using SEPs are likely those most motivated to get coverage — especially those who know they’ll need medical services in the near term. That’s the best explanation for the higher claims costs among SEP enrollees, not consumers gaming the system.

The insurers’ report also doesn’t support their claim that SEP enrollees are dropping coverage (“lapsing”) inappropriately.  It found that, among the insurers surveyed, 5 percent of SEP enrollees lapse each month on average, compared to 3.5 percent for people who came in during open enrollment. That’s not a large difference.  Nor are there data showing that the SEP enrollees who drop their plans soon after enrolling were originally ineligible or have the highest health claims and then become uninsured, as opposed to transitioning to other coverage.

HHS’s announcement requires people enrolling in the federal marketplace during an SEP to provide documents such as a birth or marriage certificate proving that they’ve experienced a life change.  But that risks deterring eligible people from enrolling, if, for example, they can’t readily obtain needed documentation, leaving them uninsured and without needed health care.  It also risks making SEP enrollees even sicker and higher-cost, on average, since healthier people have the least incentive to go through a potentially onerous verification process and collect and submit the required documents.  

The real issue is that a large share of the uninsured didn’t even know there was an annual deadline for enrolling in marketplace coverage this year or that they may owe a penalty for failing to sign up.  We must be very cautious about building more barriers that could make it likelier that they go without health coverage.