Are insurers missing the boat on SEPs?
While a new report by the Robert Wood Johnson Foundation is suggesting ways that organizations can attract consumers during qualifying life events rather than just during open enrollment, insurers may question whether they want to tap in to this potentially risky market.
While there is limited data on how many people will become eligible for SEPs in the marketplace each year, "estimates run into the millions nationwide," the report states. Eventually, more of those who qualify for special enrollment periods (SEPs) will begin to pursue them as cultural awareness grows about this availability.
Profitable or not, SEPs are likely to grow in importance due to changes in open enrollment periods. The report notes that in 2015, open enrollment was significantly shorter than in 2014, and that the proposed period for 2016 would result in a greater window for SEPs—suggesting that whether or not insurers are interested in attracting potential SEP enrollees, they should have strategies in place to manage future consumer interest.
State-based marketplace results
The study analyzed how five state-based marketplaces (SBMs) managed SEPs in 2014—California, DC, Kentucky, Minnesota and Washington.
It found that while all five SBMs included information about SEPs on their websites, only two of them conducted outreach on the subject. Covered California created a bilingual multimedia marketing campaign that utilized radio, mail, social media and television. Washington did not have this type of mass-marketing campaign but did utilize press releases and social media to raise awareness of special enrollment.
The report concluded that based on this overall low level of SBM attention toward SEPs, "at least in 2014, they did not view SEPs as an opportunity to increase membership and market share and may have reflected insurers' concerns about adverse selection."
Adverse selection concerns
Healthcare economist and author Adam C. Powell, PhD, president of Payer+Provider Syndicate, says this concern about adverse selection is the underlying reason that insurers do not typically invest resources to encourage people to join their plans during Special Enrollment Periods (SEPs).
He notes that under the Affordable Care Act, insurers may not use an individual's medical history in determining the premiums they are charged, and that instead, they must rely upon four criteria: age, geography, family size and tobacco use.
"Within a given bucket of people, those seeking insurance during a SEP may be in worse-than-average health," he says. "In all states, giving birth triggers a SEP. Babies use quite a bit of care in the first year of life. Likewise, in all states, involuntary loss of employer-sponsored coverage triggers a SEP. In Washington DC, traumatic events like domestic violence and divorce trigger SEPs. Furthermore, in DC, a SEP can be granted if a person is experiencing a serious medical condition during another qualifying event, which impeded their ability to enroll then."
Powell notes that while SEP triggers like childbirth are more likely to occur with younger individuals, their age does not necessarily make these people more profitable for an insurer to cover.
"As insurers must charge the same price to all individuals within an age/geography/family size/tobacco use bucket, if people experiencing SEP triggers are more needing of care than people not experiencing SEPs, they will be less profitable than the other people within their bucket," he says.
He notes that adverse selection can be harmful to both plans and their members, so it follows that promoting the practice of SEPs could potentially have an adverse effect on marketplaces.
Other challenges SBMs reported with SEPs included resource capacity, IT functionality and verification processes for SEP eligibility.