ACA enrollment extension may end up costing insurers

Will last-minute shoppers be healthy or sick?

The decision to extend the enrollment period for Affordable Care Act insurance plans may prove costly for insurers, according to Bloomberg.

The Obama administration extended the enrollment deadline on the federal exchange by one week, to Feb. 22, FierceHealthPayer previously reported. Most state-run exchanges also extended their deadlines.

The extensions happened for three reasons: Bad weather in the Northeast, wait times and back-end website issues that stalled the application process, and the impending tax penalty for those who choose not to buy insurance.

The 2014 tax season is the first year that those without insurance face a fine. Many Americans won't learn about this until they see a tax preparer--and without a deadline extension, they cannot purchase coverage and therefore avoid the fine for the 2015 tax season, Bloomberg pointed out.

Sen. Tammy Baldwin (D-Wisc.) and 10 other U.S. Senators have written a letter to Department of Health and Human Services Secretary Sylvia Mathews Burwell calling for a "special enrollment period" to give those who face the penalty for the 2014 tax season a chance to purchase coverage in 2015. The letter estimates that this would affect as many as 4 percent of Americans. Burwell will announce a decision on this matter soon, Bloomberg said.

The special enrollment period, if given the green light, could be risky for insurers. That's because it represents a type of adverse selection, Jim O'Connor, principal and consulting actuary at Milliman, told Bloomberg. Those who wait until the last minute to buy health insurance typically do so only because they suddenly need it, O'Connor said, adding that it takes as many as seven healthy people to balance the costs of one unhealthy person.

At the same time, he said, the enrollment extension could "shake up some of the healthy people" who have gone without insurance but do not want to pay the fine, which in 2015 is $325 or 2 percent of their income.

In a post on Health Affairs, Timothy Jost, a health law professor at Washington and Lee University, downplayed the effect that an enrollment extension would have on insurers. Those who sign up would like comprise "a reasonably healthy and inexpensive group," he wrote. This would improve risk pools and have little effect on actuarial projections for 2015 and 2016 premiums, Jost said.

For more:
here's the Bloomberg article
read Sen. Baldwin's letter to HHS (.pdf)
here's the Health Affairs post

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