What we learned from the 2015 exchange open enrollment period: Three observations

Houchens-PaulWith the insurance marketplace open enrollment period coming to an end in February, the U.S. Department of Health and Human Services (HHS) has released new data on the total number of plan selections in the federal health insurance exchange. This information provides high-level information on the distribution of plan selections, split between new and existing exchange consumers, with further insight into the auto-enrollment process and consumer migration between plans. Three observations from this data:

1. Nearly 4.7 million new consumers selected a plan on the federal exchange, representing 53% of total plan selections. For insurers new to exchange markets in 2015, or priced more competitively relative to 2014, the high proportion of new consumers provides the opportunity for significant market share gains. If 2014 experience is an indication, consumers entering the exchange market will gravitate toward the lowest-cost plans. This is supported by emerging evidence of new market entrants and existing insurers (pricing more competitively in 2015) gaining market share. On a long-term basis, the individual market may experience a high degree of churn in its consumer base, which is due to changes in a consumer’s eligibility for Medicaid or affordable employer-sponsored health insurance that impact eligibility for exchange premium assistance.

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2. The majority of existing exchange consumers elected to renew 2014 coverage. A major question going into the 2015 open enrollment period was the degree to which exchange consumers would shop for new coverage in 2015. More than 70% of existing 2014 exchange consumers, approximately 3 million individuals, elected to remain in the same plan for 2015. Although we do not have state- or insurer-level data, this likely has resulted in 2014 market leaders maintaining a large portion of their membership bases. Analysis of enrollment data from first quarter 2015 financial statements and changes in the insurer’s relative price position (RPP) in the exchange from 2014 to 2015 will provide better indication of the price elasticity of exchange consumers at the state level.

3. A large majority of consumers renewing their 2014 plans relied on the auto-enrollment process, increasing the likelihood of net premium increases in 2015. Despite strong encouragement by several journalists and HHS, only 34% of consumers renewing coverage for their 2014 plans elected to go through the active enrollment process. For these consumers, monthly premium assistance amounts for 2015 were recalculated based on their household incomes, ages, and their plans’ 2015 RPPs to the 2015 subsidy benchmark plan. For the remaining 66% of consumers who renewed coverage, monthly advanced premium assistance amounts in 2015 will be equal to 2014 amounts. To quantify the impact to consumers of auto-enrolling versus actively renewing their 2014 coverage, we examined cost differences for consumers who purchased the subsidy-benchmark plan in 2014. As illustrated in the figure below, consumers who purchased the 2014 subsidy benchmark plan and elected to forgo the active enrollment process increase their likelihood of monthly cost increases. For example, based on the distribution of county-level 2014 plan selections in the federal exchange, 79% of 60-year-olds would experience net cost increases of greater than $50 if auto-enrolled, while only 35% who elected to actively renew their 2014 plans would experience such increases.

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While 2014 market leaders may have had a large portion of their membership bases renew coverage, a material portion of the membership base may have higher monthly costs in 2015 relative to 2014. This may result in 2015 persistency rates being much different than experienced in 2014.