Health Care MarketplaceNews & Research

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.

Cost Assistance for Health Insurance in 2018 – On and Off the Marketplace 

The next open enrollment period for health insurance in 2018 starts on November 1, but you’ll need to plan ahead if you want to maximize the shorter signup period this year. You’ll have just 45 days to choose and enroll in a plan that fits your needs and budget. Fortunately, if you find that health insurance is more than you can afford, the ACA offers several different methods to make coverage more affordable. There are qualifications, however, so it’s important to understand the differences between cost assistance options. In addition, there are other ways that health insurance can be made affordable that are not part of the ACA.

Federal Poverty Level and MAGI

Assistance is based on your Modified Adjusted Gross Income (MAGI) and the federal poverty level. MAGI is your income adjusted for deductions and then modified by adding some of those deductions back for the computation. The federal poverty level is based on your household income and size. In 2017, the federal poverty level for a family of four is $24,470. This means that your entire household income based on your MAGI cannot be more than $24,470 to be considered at poverty level.

Premium Tax Credits

If your family income is between 100 percent and 400 percent of the federal poverty level based on your MAGI, you may qualify for premium tax credits through the health insurance marketplace (or via a broker’s site, like this one, that can take care of the assistance for you). Premium tax credits can be paid directly to the insurance company to lower your monthly premium or you can use the credit when you file your taxes at the end of the year.

This means that if you have a family of four and your household income is between $24,470 and $97,000, you may qualify for the credit. Tax credits, also referred to as subsidies, cap your monthly insurance premium between 2 and 9.5 percent, depending on your income. Caps are based on the price of the second-lowest cost silver plan, but you don’t have to choose this plan unless you want to. You can apply your subsidy amount to any level. If your income changes, the amount of your tax credit will also change. You can also decide what percentage of the tax credit you receive is paid to your health insurance provider.

Tips for Premium Tax Credit Use

Tax credits are associated with the health insurance marketplaces, like the federal one at HealthCare.gov, but in 2018, you can apply for health insurance using a broker and still benefit from subsidies. You can also qualify for the credit even if you do not have to pay taxes.

These subsidies are both refundable and payable in advance. Note, though, that you will have to file taxes to get the credit, even if you don’t owe any money to the government. If you don’t file, you risk not claiming the credit but you also risk the ability to use the credit in future years. You cannot file married filing separately in most cases, but you can file single or married filing jointly.

When you apply for coverage, you will be given an estimate of your premium tax credit as well as your family parameters. Taking the credit in advance will mean you must make an adjustment at the end of the year if your income changes, whether it decreases or increases.

Choosing to reduce the cost of your insurance using the credit reduces the amount you can use on your tax returns. If you use all of the credit to reduce the cost of your insurance and your income increases during the year, you will be required to repay the tax credit when you file your taxes. If you suspect your income may increase during the year, many tax experts recommend that you don’t use the entire credit to reduce your insurance costs, or that you save throughout the year to cover the cost of the repayment when you file your taxes if necessary.

Cost-Sharing Reductions

For people who earn no more than 250 percent of the federal poverty level, extra cost assistance is available that could help offset out-of-pocket medical expenses for the year. This extra savings is known as cost-sharing reductions.

You can only qualify for cost-sharing reductions if you enroll in a silver-level health plan, unlike tax subsidies, which can be applied toward any level of plan. Silver plans have higher premiums than bronze plans, but it’s important to consider total cost when you determine what your healthcare needs will be. Silver plans have smaller deductibles, sometimes thousands less than bronze plans, and with cost-sharing reductions, you may find that you save a significant amount on your health insurance.

Cost-sharing reductions only apply to covered costs in your network, so compare plans to determine what services best suit your needs. The amount of cost-sharing reduction you are eligible to receive is based on income. Note that these reductions do not actually lower your premium in the same way the tax credits do. There are different levels of cost-sharing reductions, each based on actuarial value of the policy and your income. They are:

  • CSR 94: 100 to 150 percent of the federal poverty level
  • CSR 87: 150 to 200 percent of the federal poverty level
  • CSR 73: 200 to 250 percent of the federal poverty level

The numbers refer to the “actuarial value,” which is the value of the policy from an insurance standpoint. Plans with an actuarial value of 70, for example, will pay for about 70 percent of your covered medical costs for the year, leaving you with around 30 percent in out-of-pocket expenses.

Medicaid Expansion

Under the ACA, Medicaid was expanded so that people could qualify for the program based on higher incomes. States could choose to expand their guidelines, and 31 states along with the District of Columbia did so. In states where Medicaid was not expanded, you may still qualify as each of these states sets its own criteria for qualification.

Medicaid and CHIP are designed for people who have low incomes, including families, children, pregnant women, the elderly and people with disabilities. In states that agreed to expansion, you must have a household income at or below 138 percent of the federal poverty level to qualify with no other criteria required.

One of the issues facing Medicaid today is that President Trump and Republicans in Congress believe that the program is riddled with fraud and mismanagement. They are proposing eliminating the expansion and creating either block grants or a per-capita system that would allow the federal government to give each state a set amount of money each year for the program, allowing states to have more control over enrollment. They believe that this will reduce fraud and make states more accountable for the program.

Despite recent healthcare reform bills failing in Congress, it is possible that the qualifications for Medicaid could change in the next few years. Many believe that proposed changes will result in millions losing coverage under the program. Right now, however, you can still pursue Medicaid as an option if your income falls within the guidelines where you live.

Catastrophic Health Plans

If you’re under the age of 30, you may be able to purchase a catastrophic health plan in lieu of major medical insurance, and it will still count as minimum essential coverage under the law (meaning you won’t have to pay the penalty fee for not having insurance). These plans have very low premiums but extremely high deductibles, as high as $6,850 in some cases.

Catastrophic plans are designed to protect healthy people from serious sicknesses or injuries and the healthcare costs they can incur while allowing them to pay for routine medical expenses out of pocket. Consider your medical costs carefully before choosing this route. Catastrophic coverage could save you money during major crises and in monthly premiums, but if you need regular medical care, they aren’t sufficient.

Outside the Marketplace

It may benefit you to choose a policy outside the marketplace. Although most of the attention has been focused on the marketplace, you do have the option of purchasing individual policies in every state except the District of Columbia. These are health insurance policies purchased directly from the insurance carrier or an agent.

Consumer protections put in place through the marketplace also apply to these policies, including pre-existing condition protections and covered essential health benefits, among others. You may find that a policy outside of the marketplace could provide the same coverage at a lower cost. It’s important to compare all options and research each policy, company and agent before purchasing an off-marketplace insurance policy to find one that fits in your budget.

There are many ways that you can make health insurance more affordable. Use generic medications instead of brand-name drugs where possible; check in with your doctor once a year for wellness screenings that might catch diseases or conditions earlier, when they’re less expensive and time-consuming to treat; take a proactive approach to your health, including eating well and exercising regularly; and following the guidance of physicians you trust. The healthier you are, the lower your chances are of needing costly medical care as you age, which will reduce your yearly healthcare costs and may enable you to purchase lower-premium, higher-deductible plans.

Nearly Half of the Country Left with One Carrier Option in 2018

On August 24, CareSource announced that they would offer healthcare plans in the last “bare” county in the country, Paulding County, Ohio. Earlier in the summer, the Centers for Medicare and Medicaid Services (CMS) issued a map showing over 40 counties that would have no insurers in the healthcare marketplace for next year. With the CareSource announcement, every county in the country has at least one insurer in the marketplace.

Although every county now has an insurer, it does not resolve a bigger issue in the United States, which is that a large percentage of the country has only one company to choose from for healthcare in the marketplace.

According to the most recent CMS map, nearly 47 percent of the country will have just one carrier on the exchange, limiting choice nationwide. That 47 percent covers 1,476 counties and leaves over 2.6 million people with no choice in carrier for the upcoming year.

Medicaid Expansion

There are several reasons that insurers are leaving the Affordable Care Act (ACA) marketplace. One explanation for insurers pulling out of the exchanges is that the ACA was based on every state expanding Medicaid, the federal-state program that provides medical insurance for the poor. After a Supreme Court case in 2012 ruled that the government could not require states to expand their programs, 19 states opted not to participate in the expansion.

This put a bigger burden on states to entice lower-income enrollees to the marketplaces. But some customers fall into a coverage gap in which they can’t afford premiums but make too much money to qualify for Medicaid.

Absent those customers, the marketplace has had to rely on participation from young and healthy enrollees to offset the cost of care for older people – and most states haven’t seen the numbers they need to keep carriers from fleeing the marketplace.

Individual Mandate and Cost Sharing Reductions

Low participation isn’t the only reason that insurers have bailed for 2018. Some insurers claim that they’re leaving because there’s no guarantee that they will receive cost-sharing reduction payments to defray medical costs for people with low incomes. The ACA guarantees carriers these payments so that they can offer lower premiums to lower-income customers.

Another factor contributing to fewer choices next year is an executive order signed by President Trump in January that allows the IRS and other agencies to grant relief of tax penalties imposed by the individual mandate that requires all Americans to have health insurance. Without threat of a tax penalty, it could mean that fewer young and healthy people will sign up for health insurance, perpetuating the cycle of rising costs, higher premiums and hesitant carriers.

Impact of Limited Plans

Regardless of the reason insurers have chosen to leave the marketplace, the fact is that having only one insurer to provide health insurance limits a consumer’s ability to shop for affordable healthcare. One of the biggest issues facing consumers in the counties with just one option is that they could face premium increases of 20 percent or more. In some areas, there has been talk of rate hikes as high as 60 percent if the Trump Administration does not continue cost-sharing reductions as outlined in the ACA. As it stands, CSR payments have only been funded through August.

Monopoly of Service

Although there were many predictions in early summer that portions of the country would have no options for health coverage, analysts also predicted that an insurer would step in to cover those areas since doing so would give the company a monopoly on service. Being the only insurance company in a county means that it has more leeway to set prices for profits. Despite limits on how high insurance companies can raise rates for those in lower-income categories, middle-income families may face significant rate increases in areas where there is only one option.

There is still time for insurance companies to offer policies in the counties with just one option. The deadline for making that decision is September 27. However, most experts believe that there will be few changes to the ACA marketplace for 2018 from this point forward and that consumers will be forced to use the one option available to them in their county if they want or need exchange-based health insurance for the year.

The Senate Committee on HELP

The Senate Committee on Health, Education, Labor & Pensions (HELP) will hold hearings starting early September on how to stabilize the health insurance marketplace for the open enrollment period this year. According to a press release issued on August 22 by ranking members of HELP Lamar Alexander (R-TN) and Patty Murray (D-WA), these hearings will gather input from state insurance commissioners and state governors on how to stabilize the market, including premiums.

Open enrollment for the 2018 year starts on November 1, so these hearings will need to happen fast if Congress is to push stabilization efforts before customers return to the exchanges for next year. The first hearing is scheduled for September 6, during which state insurance commissioners will offer advice for implementing techniques to keep the marketplaces steady. The following day, state governors will give their input on premiums as well.

Healthcare reform has been rocky at best this year, with Republican members of Congress calling for an overhaul of the Affordable Care Act (Obamacare) without coming to an agreement on how that should be done. After six months of political maneuvering, Senate Republicans shot down a skinny repeal bill that would have eliminated the ACA’s mandates, which could have caused mayhem in the market for 2018.

Now, senators are ready to get back to work when they start the fall session, Lamar Alexander chief among them. The senator from Tennessee insists that Congress will pass a stabilization package that includes cost-sharing reduction payments (CSRs). These CSRs have been a sticking point for insurers, who depend on them to offer lower pricing to customers who meet the federal guideline for extra assistance when applying for health insurance.

Several large insurers backed out of the marketplace in 2018 citing financial losses and uncertainty over CSRs. Carriers must sign federal contracts to participate in the exchanges by September 27.

Alexander believes that state insurers and governors are more likely to be able to address stabilization efforts because they are in his words “closest to the problem.” The HELP committee comprises 11 Democrats and 12 Republicans, including several vocal members from both ends of the political spectrum, such as Rand Paul (R-KY), a former presidential candidate and a hard-right senator who clashes with more moderate members of his party; Lisa Murkowski (R-AK) and Susan Collins (R-ME), two holdouts in recent Republican reform efforts; Al Franken (D-MN), who insists that there will be bipartisan efforts to reform healthcare; Tim Kaine (D-VA), Hillary Clinton’s running mate last year; and liberal icons Bernie Sanders (D-VT) and Elizabeth Warren (D-MA). Here’s the full list of HELP committee members:

Democrats:

Republicans:

Republican Efforts to Repeal and Replace Obamacare Fail

It’s no secret that Republicans have detested the Affordable Care Act since its passage back in 2010. It goes against their ideals for American healthcare- especially since it reduced privatization of the market and increased taxes for the general public. On July 25th, the Senate voted to open up discussions involving healthcare reform and the removal of the Affordable Care Act. The final vote ended up as a 50/50 tie, being broken only by Vice President Mike Pence voting in favor of the movement.

The same night, the Senate voted on the Better Care Reconciliation Act (BCRA) with a few additional amendments. One amendment would allow insurance companies to sell plans that didn’t work with Obamacare such as not covering pre-existing conditions. This amendment proposed by Senator Ted Cruz would be allowed as long as the insurance carrier also sold at least one plan which did cover pre-existing conditions. Another proposed amendment would add $100 million in funding to aid those who would lose Medicaid coverage if the Better Care Reconciliation Act were to pass. A third amendment proposed by Senate Majority Leader Mitch McConnell would remove individual and employer mandates under BCRA. This vote failed to reach the required 60 favorable votes it needed to pass. 50 Democrats and 7 Republican members voted against this movement.

“Repeal Only” Plan

After agreeing to discuss reforms to Obamacare, a Trumpcare plan was proposed which would serve to repeal the Affordable Care Act altogether without a replacement in plan. In the event that this passed, it would be followed by a 2 year period in which the government and health insurance industry would have time to create an alternative to Obamacare. This plan hasn’t gained much popularity due to the fact that this 2 year period would likely destabilize the healthcare market even further, raising premiums and reducing coverage for the American people. It seems that the majority of Americans feel that this would be a step in the wrong direction. For this reason, the Senate voted against this amendment with 45 in favor votes and 55 against. Even 7 Republicans voted against the movement including Senator Lamar Anderson of Tennessee, Senator Shelly Capito of West Virginia, Senator Susan Collins of Maine, Senator Dean Heller of Nevada, Senator John McCain of Arizona, Senator Lisa Murkowski of Alaska and Senator Rob Portman of Ohio.

“Skinny Repeal” Plan

Another attempt at the dismantling of the Affordable Care Act was voted against in the Senate on July 28th. This “skinny repeal” would eliminate Obamacare’s tax on medical devices and the individual and employer mandates. Republican Majority Leader Mitch McConnell had spent the previous several weeks attempting to gain support for this amendment from members of Congress and reportedly seemed shocked when it didn’t receive the amount of votes it needed to pass. Three Republican lawmakers including Senator John McCain of Arizona, Senator Lisa Murkowski of Alaska and Senator Susan Collins of Maine voted against the majority of Republicans to disallow the passage of the bill. John McCain, a long time opponent of Obamacare, has openly refused to support any new bill which isn’t bipartisan. He believes that Republicans and Democrats must work together in order to create a successful healthcare reform. CNN reports that this skinny repeal could have wreaked havoc in the healthcare market by causing premium prices to increase up to 20 percent, while the Congressional Budget Office reported that this bill could raise the nations uninsured population by 15 million.

Why Won’t Obamacare Budge?

Now that Americans are beginning to understand the significance of the Affordable Care Act and the many protections it has given to consumers, critics of it’s removal feel confident that Republicans will face an extreme challenge repealing it. A statement by Former House Speaker John Boehner has been leaked in which he admits that it will be impossible for Republicans to completely remove Obamacare as it’s not what the people want.

As of now, the Affordable Care Act still stands, requiring all Americans to have an Obamacare compliant insurance plan for the upcoming year. The next enrollment period will begin on November 1st and end December 15th for the 2018 plan year. One can only hope that from all this conflict a truly bipartisan conclusion can be met which will benefit the American people.

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