Restricted enrollment periods as an alternative to individual mandates

We recently ran a poll on the best course of action to reduce adverse selection if the PPACA individual mandate is struck down by the Supreme Court. The number one answer was “use limited enrollment windows to reduce the occurrence of people joining a plan only when they become sick.”

The PPACA already requires that state health insurance exchanges provide an initial open enrollment period as well as an annual open enrollment period. The idea suggested by the report from the Government Accountability Office (GAO) on potential ways to increase voluntary enrollment is that more restrictive enrollment periods might be useful in the absence of a mandate.

In the absence of a mandate, open enrollment periods could be enhanced beyond the  annual periods provided for under the Patient Protection and Affordable Care Act, as  amended (PPACA) by incorporating different open enrollment period frequencies and  coupling them with various penalties for late enrollees who do not enroll when first  eligible. Limiting access to coverage to only such periods is intended to reduce the  likelihood that individuals would otherwise wait until they need health care to enroll.

Open enrollment periods could vary in their frequency. Generally, the less frequent  they are, the less likely individuals will risk remaining uninsured until the next such  period. While PPACA provides for annual periods, these could be extended to every  18 months, every 2 years, or less frequently—some suggesting as infrequent as every  5 years. Or the open enrollment period could be a one-time event in 2014 with  subsequent special open enrollment periods only for individuals experiencing  qualifying life events that change eligibility for coverage, such as giving birth or  attaining adulthood, divorce, or changing jobs.

The report suggests that changing open enrollment frequency could be combined with financial penalties or restrictions on coverage for those who miss the window. Key concerns raised by the GAO include the following:

  • Financial penalties might make coverage even more unaffordable for the low-income individuals the exchanges are designed to help
  • Overly restrictive enrollment periods may run counter to the goal of increased coverage
  • The additional inconvenience might influence the younger, healthier segments of the population to avoid enrolling

 
Interestingly, enrollment windows have been used to manage adverse selection related to the PPACA already. In 2010, Oregon implemented an enrollment window for child-only policies after two major insurers stopped carrying such policies in response to the PPACA’s elimination of preexisting conditions underwriting. Insurers were afraid that parents might wait to enroll until their children became ill.

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