Study: Government undercompensates insurers for special enrollment period customers

Document titled, Affordable Care Act
People who buy coverage during special enrollment periods seek to address short-term, pressing care needs more than do people who simply drop coverage during the year. (Getty/Designer491)

Health insurers are probably going to continue to avoid signing up individual marketplace customers during special enrollment periods unless federal payment rules change, according to a new study.

The study, published in this month’s edition of Health Affairs, said insurers have complained that people who sign up outside the standard enrollment window tend to be much higher utilizers of care, which in some cases fueled losses that led insurers to exit the marketplaces.

The federal government responded by altering the risk adjustment rules to increase carriers’ payments for members covered for less than a year. That includes those who enrolled during SEPs and those who enrolled during the regular open enrollment period but dropped coverage during the year.

RELATED: CMS outlines changes to special enrollment period rules

Thus, researchers set out to determine two things: whether the original risk-adjustment methodology indeed underpaid insurers for SEP enrollees, and whether the changes the government made solved the problem. To do so, they examined data from two large—unnamed—insurance companies.

They concluded that the changes appear to have solved the issue of underpayment for people who enroll during the regular open enrollment period and then drop coverage during that same year. However, further efforts are needed to avoid “significant undercompensation” for SEP enrollees, the study authors said. That’s because more SEP enrollees seek to address short-term, pressing care needs than do people who simply drop coverage during the year.

In order to adequately compensate carriers for the selection risks associated with SEP enrollment, policymakers may have to further tweak the risk-adjustment methodology to increase “enrollment duration factors” that apply to SEP enrollees, the study said. Doing that, the authors argue, could encourage insurers to solicit business from people who qualify for SEPs, who often don’t take advantage of their option to enroll in marketplace coverage.

“Since health insurers are underpaid, it is no surprise that they avoid enrolling consumers midyear and, at many companies, deny commissions to brokers and agents who sell insurance outside open enrollment periods,” lead study author Stan Dorn said in a statement.

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