Staff members at Covered California, California’s state-based public exchange, are starting to reveal a little information about what the consumers who sign up for health insurance outside the normal enrollment period are really like.

How entities in the Patient Protection and Affordable Care Act (PPACA) public exchange system handle the special enrollment period (SEP) issue may affect how easily-eligible consumers can get covered without going through daunting red tape.

The way the system handles the SEP issue may also affect whether insurers see the system as an insurance shopping mall that plays fair, or a mall that favors the shoplifters over the stores.

In November, executives at UnitedHealth Group Inc. (NYSE:UNH) reported that the company was losing hundreds of millions of dollars on individual exchange business, in part because SEP claims were much higher than it had expected. The company noted that cost differential between regular enrollees and SEP enrollees was much bigger for business that came in through the PPACA exchange program than for business that came in through other channels, possibly because the company verified applicants’ eligibility for SEPs when the applicants came in outside of the exchange system.

UnitedHealth executives implied that the SEP verification gap might be one reason the company could limit or eliminate its public exchange sales effort in 2017.

See also: UnitedHealth to avoid 2016 public exchange plan sales

Since then, UnitedHealth and many other individual health insurers have eliminated or slashed agent commissions for 2016 SEP sales.

See also: Anthem changes special enrollment period commissions

Since January 2014, PPACA has prohibited sellers of individual health coverage from considering personal health factors other than location when making decisions about whether to issue coverage, and it has prohibited insurers from using personal health status factors other than location, age and tobacco use when setting coverage prices.

To keep consumers from viewing the new underwriting restrictions as an invitation to wait until they get sick to pay for coverage, insurers, regulators and exchange managers developed the “open enrollment period” system, which is really a system for limiting when consumers can buy health coverage without showing they have a good excuse for buying coverage.

For 2016, for example, the open enrollment period started Nov. 1, 2015, and ended Jan. 31. To buy major medical coverage now, inside or outside the PPACA exchange system, consumers must show they qualify for a SEP. Consumers can get SEPs if they lose access to employer-sponsored coverage, marry, have a baby, adopt a child, move, or meet the eligibility criteria for one of the many other SEP categories that the U.S. Department of Health and Human Services (HHS) has established.

Up till now, HHS, state-based exchanges and insurers have published little information about SEP enrollees’ characteristics.

The Covered California board is discussing the possibility of adding new SEP verification rules, and the staff of that exchange included data on California’s SEP enrollees in a board meeting packet posted last week. For a look at what the exchange staff and California patient advocacy groups are saying about the SEP enrollees, read on.

Pie chart

1. Special enrollees may be making up a larger share of the exchange plan enrollee population.

John Bertko, the Covered California chief actuary, said that the percentage of all enrollees who came to the exchange through a SEP increased to 13 percent in 2015, from 11 percent in 2014.

Covered California has four major qualified health plan (QHP) issuers.

The percentage of SEP enrollees varies widely from issuer to issuer, and, in 2015, the share of enrollees who came in through SEPs was close to 20 percent at two issuers, Bertko said.

See also: UnitedHealth: Government plans look good

Random abstract bar chart graphic

2. The health claim cost difference for regular enrollees and special enrollees may range from 0 at some plans to 50 percent at others.

Covered California staff members talked to the managing actuaries at 12 of the exchange program’s 13 QHP issuers.

Based on publicly reported data, and the private discussions with the actuaries, Bertko believes that SEP enrollees tend to have a higher level of health risk than regular enrollees, and that “some of the difference is likely attributed to individuals inappropriately claiming SEP events,” according to his presentation.

Nothing is proven, but, at the four major QHP issuers, actuary estimates of the average cost differential for regulars and SEP enrollees range from 0 to about 50 percent higher.

Bertko said some types of enrollees who clearly are eligible for SEPs, such as newborn babies, are much more expensive to insure than enrollees who come in during the open enrollment period. But a regular enrollee-SEP differential seems to exist even after plans adjust for those types of factors, he said.

See also: Feds may go after some ‘special’ PPACA exchange plan enrollees

A woman with a long Pinocchio liar nose

3. SEP verification requirements for off-exchange enrollment causes about 15 percent to 35 percent of the SEP applicants to disappear.

Bertko said some issuers have documented hundreds of cases of off-exchange applicants who first were denied coverage due to their not being able or willing to provide valid proof of SEP eligibility, then re-applying for coverage through Covered California and getting SEP coverage.

Consumers who get SEP coverage through Covered California have to attest, or swear upon penalty of perjury, that they qualify for a SEP, but they do not normally have to provide paper documentation of eligibility when they apply.

“When comparing SEP costs of off-exchange (subject to valid proof) to on-exchange (subject to attestation) enrollment, the cost difference between SEP and [open enrollment period] drops at least 50 percent,” according to Bertko.

Representatives from Consumers Union, SEIU California and other patient advocacy groups wrote to object to the idea of adding paper SEP verification standards, arguing that, in practice, in many cases, consumers are unlikely to have paper documents proving that they qualify for SEPs.

Today, for example, no federal or state law requires an employer to provide a written termination notice, the advocacy group reps say.

Similarly, the reps say, workers may lose access to affordable employer coverage because of fluctuations in hours that do not lead to the workers getting any kind of written notice. 

Moreover, health plans have a vested interest in shutting out high-risk applicants, and having the plans help verify SEP eligibility documents would be inappropriate, the reps say.

See also: 

CMS offers narrow individual health tax SEP

How to get those special PPACA sales feelings

   

Have you followed us on Facebook?