Drafters of a National Association of Insurance Commissioners (NAIC) health insurance exchange white paper should give an example of what can go wrong when states adopt guaranteed issue laws without establishing open enrollment periods.

C.M. Gallaher, a vice president at America’s Health Insurance Plans (AHIP), Washington, makes that suggestion in a comment letter submitted to the National Association of Insurance Commissioners (NAIC), Kansas City, Mo.

The Exchanges Subgroup at the NAIC has been developing white papers that would give state insurance regulators’ regulators views on implementation of the section of the federal Patient Protection and Affordable Care Act of 2010 (PPACA) that call for the creation of a new system of health insurance exchanges.

PPACA

Starting in 2014, the exchanges are supposed to distribute subsidized health coverage to individuals and small groups.

That same year, PPACA is supposed to require all major medical insurers to sell PPACA compasscoverage on a guaranteed-issue, mostly community-rated basis.

One of the NAIC Exchanges Subgroup white papers deals with “adverse selection,” or the risk that some insurers will end up assuming more than their fair share of risk, in a way that will end up destabilizing local markets, state markets or the national market.

Timing Matters

Exchanges Subgroup drafters already have acknowledged in the adverse selection white paper that pre-set enrollment periods – or, “open enrollment periods” — are important in a market in which insurers must sell coverage to sick people at standard prices.

Otherwise “individuals can purchase coverage when they it and drop it when they do not,” Gallaher says.

The Exchanges Subgroup could strengthen a short, general section about that problem by noting that Massachusetts recently experienced this problem when the “universal health care access” program it established in 2006 required carriers to sell coverage on guaranteed issue, community-rated basis year-round, Gallaher says.

AHIP is recommending that the white paper drafters remind readers of Massachusetts’ experience by including the following passage:

“As a result, Massachusetts has implemented stricter rules regarding enrollment periods. In 2011, individuals are able to enroll during two open enrollment periods. In 2012, this will be reduced to one open enrollment period. Furthermore, individuals in Massachusetts are not eligible to enroll in the nongroup market if they are eligible for employer sponsored coverage that is at least actuarially equivalent to minimum creditable coverage, as defined by the Commonwealth Health Insurance Connector.”

Other Exchanges Subgroup coverage from National Underwriter Life & Health: