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Enrollment vs. Effectuated Enrollment: What’s the Difference?

Two reports released by the Department of Health and Human Services (HHS) indicate a difference between enrollment in Obamacare’s individual marketplace and those who actually activated their policy by paying their first month’s premiums. Once you pay for your healthcare policy, the insurance industry determines the policy to be effectuated, which essentially means that it has “gone into effect.”

According to a report, 2 million fewer people effectuated their enrollment in 2017 than they did last year. This represents an almost 16 percent reduction between the number of people who signed up in January and the number of people whose coverage became effective in February.

Why the Numbers Matter

In most states, the market is funded through fees charged to health insurers for plans that are effectuated, not for the number of enrollments they receive. This means that a high effectuation rate is very important to the stability of the insurance marketplace. The number of effectuated policies does change throughout the year for various reasons, like gaining coverage through a new employer. States typically look at effectuated enrollment on a month-to-month basis to get a more accurate measure of customer participation.

Cost a Main Factor

According to a report released by the Centers for Medicare and Medicaid Services (CMS) in June 2017, exit polls conducted by the agency found that high premiums was the main reason people chose not to effectuate their coverage. A review of those who canceled their insurance or did not pay required premiums had higher premiums than those who maintained their coverage.

The average premium for those who did not pay for coverage was $209 a month compared to $150 a month for all consumers with an active plan as of April 2017. Lack of affordability was the most common explanation for why people chose not to pay their first month’s premium, with 46 percent claiming that premiums were too high and 20 percent stating that there was a significant premium increase between when they signed up and when they had to pay.

Employer Coverage

Consumers tend to use the healthcare exchanges because they are not offered health insurance through an employer. In the exit polls conducted by the CMS, 49 percent of those asked said they obtained coverage elsewhere once they had signed up, with 58 percent of those getting insurance through an employer. Another 22 percent said they became eligible for Medicare and no longer needed insurance through the exchange.

Loss of Insurer

There were consumers who reported that they chose not to continue coverage when their insurer left the marketplace, with 77 percent stating that they would maintain coverage as long as they could keep the insurer they had in 2016. Overall, 75 percent of those who selected a plan and paid for it in 2016 elected to continue coverage in 2017.

Comparison to 2016

According to the CMS, there was a 12.6 percent difference between the almost 13 million people who signed up for health insurance by the close of enrollment in 2016 and those who paid their premiums. In 2017, that percentage rose to 15.6 percent.

This indicates that for the first two months of the year, more people were paying premiums and putting policies into effect than they did during the same period of 2016. Experts anticipate that the numbers may have peaked in March and then gone down during the remaining months of the year.

It’s been a trend over the past two years as the number of policies peak around May or June and then slowly decline. The difference for 2017 is that the decline was expected to begin sooner in the year. By the end of the year, it’s expected that 28 percent fewer people will be enrolled in their plans than customers were at the end of 2016.

Future Enrollment Predictions

Some say that the CMS, under the Trump administration, may be counting the dropped policies in a way that makes them appear negative. They point to high costs and lack of affordability that are leading more people to drop insurance. According to Seema Verma, administrator for CMS, customers are sending a message that costs are a driving factor in their decision to purchase health insurance.

With more insurers choosing to leave the exchanges, reducing options for consumers, the administration predicts that effectuated rates will continue to drop. The predicted rise in premiums due to the possible loss of some subsidies may also increase the number of people who let their policy lapse.

2018 Enrollment Challenges

Although the ACA remains in effect, the Trump administration has made changes to enrollment for 2018 that may create even more challenges for new and returning customers. For starters, open enrollment will close December 15, staying open for just 45 days. In previous years, customers had about twice as long to sign up. This means enrollment falls around the holidays when you may have less money and little time, and it will be shorter as well.

The Trump administration also proposed requiring people signing up outside open enrollment to receive preapproval verification that they had a life change, such as a move, job loss or marriage. This could delay coverage while people await verification.

Another proposal is that anyone who owes past-due premiums within the past 12 months would be required to pay those before being granted new coverage from the same company. Consumer advocates say that this proposal does not take into account valid reasons people allow their premiums to go past due, such as a job loss or an error on the part of the company.

News reports tend to focus on the millions of people who enroll in the marketplace during open enrollment, believing that this indicates that Americans are happy with the law as is. Effectuated enrollment tells a slightly different but significant story. The difference between enrollment and effectuated policies affects insurer participation and customer signups, a cycle that could continue without concentrated efforts to boost enrollment nationwide.

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