Why Don’t People Keep Their Coverage? 

Posted by | October 03, 2017 | News | No Comments

Exit polls conducted by the Centers for Medicare and Medicaid Services (CMS) found several reasons why consumers choose not to keep health insurance that they purchased in the marketplace under Obamacare. Although enrollment is often touted as high in media reports, states actually look at what is known as effectuated coverage when tallying signups.

When someone signs up for healthcare coverage, there may be a delay from the enrollment to the time the first bill is due. When you enroll and pay the premium, you have put the policy “into effect,” or effectuated the policy. As of February 2017, 15.6 percent of those who enrolled in health insurance did not pay the premium to keep their coverage in effect. This is up from 12.6 percent at the same time in 2016, and a recent report released by the CMS based on exit polls outlines the reasons for the drop in coverage.

High Cost

According to the report, consumers have seen health insurance costs rise significantly since 2013. In that year, the average premium was $232 a month while in 2017, the cost rose to $476 a month, an increase of 105 percent. These numbers reflect increases in the 39 states that use HealthCare.gov as their marketplace as opposed to their own state marketplace. An increase in premiums is the reason many consumers say that they decided not to pay for health insurance. Approximately 46 percent of those who canceled coverage said that cost was the reason while 20 percent claimed a premium increase, whether it was from the previous year or because they had to change plans, for the reason they decided to cancel.

Ineligibility for Financial Assistance

Sometimes, when people apply for health insurance, they believe they will qualify for financial assistance in the form of subsidies under the Affordable Care Act. However, it’s possible that once they complete all the documentation, they are not eligible for the subsidies or the subsidies aren’t enough to make a difference in premium costs. At least 17 percent of those surveyed in the exit polls cited this as a reason for canceling their policies.

Under the law, anyone making up to 400 percent of the federal poverty level qualifies for some level of assistance when buying marketplace plans, but assistance varies by income. If income rises, this can reduce the amount of subsidy available or make you ineligible for any subsidy.

Coverage Elsewhere

According to the CMS report, 49 percent of consumers who terminated their coverage after paying one month of premiums said that they found coverage elsewhere. Almost 58 percent of those said they obtained health insurance from an employer while 22 percent said they became eligible for Medicare. Often, people turn to the marketplace when their employer either does not offer health insurance or they are unemployed.

It’s possible that you could enroll in a marketplace plan and then find another job or gain employment that offers health insurance after you enroll, making the marketplace plan unnecessary. In addition, circumstances can change so that you qualify for Medicare after enrollment, which also eliminates the need for a marketplace plan.

Loss of Insurer

A map released in the summer by the CMS showed that 17 counties in the U.S. would have no insurer participation for 2018, something that has now been remedied. Despite the fact that every county now has coverage, much of the country still lacks more than one carrier option for next year. Choice plays a big role in customer satisfaction and retention.

According to the CMS report, 77 percent of those who were able to purchase and maintain coverage with one insurer were more likely to keep their insurance in effect. Even in areas where consumers have options, insurance companies are leaving the market, which means their customers must find plan options elsewhere. That coverage may not be as extensive and could have higher premiums than what they were paying before.

Unaware of Requirement

As late as 2015, about 20 percent of people who did not have insurance said that they were unaware that it was required, or they thought the requirement did not apply to them. In fact, some of those who don’t have insurance could be exempt under the law – but you need to apply or ask an insurance specialist about that beforehand rather than assuming as much.

Many of those who say they were unaware of the requirement to have health insurance live in rural areas with little access to national news media. Although the number of people who are unaware of the need for health insurance is dwindling, there are still those who remain uninsured because they don’t know that it’s required by law.

Medicaid Expansion

As of July 2016, 31 states along with the District of Columbia had agreed to expand Medicaid eligibility for nonelderly adults with incomes up to 138 percent of the federal poverty level. In states that did not choose expansion, eligibility is limited. In some areas, adults do not qualify for Medicaid unless they are 44 percent under the poverty level. Adults without dependent children also may be ineligible. In those states, millions fall into a gap of coverage because they earn too much for Medicaid but not enough to qualify for tax credits offered in the marketplace.

Immigrants also have problems getting coverage. Undocumented immigrants are not eligible for either Medicaid or marketplace coverage. Lawful immigrants who earn up to 400 percent of the federal poverty level are eligible for marketplace tax credits but only if they pass a five-year waiting period. These regulations have left many in the U.S. uninsured.

Healthy People

One final reason why some may enroll for insurance and then not put it in force is that they don’t see a need for health coverage because they are young and healthy. Even with the IRS penalty for not having insurance, some prefer to pay the penalty than pay a monthly premium for something they don’t believe they need. This has created issues in some areas as premiums for those who aren’t using health insurance for medical expenses help offset the costs of those who need costlier care. If healthy people continue to skip insurance or drop their coverage, insurance companies may be unable to cover the cost of treatments for those who have medical issues.

Lots of factors contribute to people dropping their coverage after signing up during open enrollment, just as there are plenty of reasons why people choose to forgo insurance altogether. Although the ACA was designed to eliminate some of these issues, it’s apparent that more work needs to be done to lower premiums, keep insurance companies in the marketplace and provide incentives for low-income families to obtain insurance.

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