As many as 6 million American households may be facing the first-ever penalty for forgoing health insurance under the Affordable Care Act in 2014, and the penalty gets steeper for 2015.
Now that the nation is facing this reality head-on, the question is whether it will impact the behavior of the hold-outs and what that will mean for health insurance carriers.
While there is no crystal ball, there are some early indicators. Egon Smola, senior vice president and general manager of consumer operations at GetInsured, the nation's second-largest online broker, provides some perspective based on customer and carrier feedback, as well as available research. GetInsured is directly involved with consumers, employers and brokers, and also provides software as a service for state-based exchanges.
Smola suggests that the penalty probably will not move a significant number of the uninsured—yet—but that doesn't mean that issuers should rest easy.
"People are procrastinators"
"I think the tax penalty is still very far back in people's minds," Smola tells Healthcare Dive. "Most folks are procrastinators and wait on their tax preparation until the last moment, and unfortunately our open enrollment period will end two months before taxes are due."
Smola says GetInsured is working to educate consumers about the tax penalties, and expects that such efforts may drive some interest in the future. However, "To date, it's not been a major driver," he says. His expectation is that the industry may see an impact during the next enrollment period, as people approach their second, and significantly higher, tax penalty.
Here is how the uninsured are set to get hit, according to Healthcare.gov:
Those who didn’t have coverage in 2014 will pay the higher of either: 1% of their household income or $95 per person ($47.50 per child under 18). The maximum penalty per family using this method is $285.
The fee increases for 2015, rising to 2% of household income or $325 per person for the year ($162.50 per child under 18). The maximum penalty per family using this method is $975.
For 2016 the penalty is set to rise to 2.5% of income, or $695 per person. After that it will be adjusted for inflation.
Consumer education varies
Certainly, some of those opting out are doing so as a matter of principle, some due to cost and some due to lack of information.
Smola quotes research by the Urban Institute's health policy center, which concluded from a survey last July that only one in five uninsured Americans do not want health insurance or prefer to pay the fine out of principle. Of those who are not opposed, three out of five believe it's an affordability challenge for them and two out of five are not sufficiently aware of the available subsidies that would make it affordable.
"I think it's really a lack of education and understanding of everything that's been put together for them to be able to afford healthcare," Smola says.
He adds that numerous insurance carriers are trying to capture this demographic by providing education and options.
"Carriers are definitely focusing their marketing efforts on attracting more uninsured Americans," he says, noting that GetInsured has seen a more than 2X increase year-over-year in plans they can offer on GetInsured.com. That increase is due to more carriers entering the market and carriers offering more plans, Smola says.
"Interestingly, it appears that regional and local carriers are making the most of the intimate understanding of their market and offering plans that are very attractive, which is reflected in their larger-than-expected share of enrollments at GetInsured relative to the top five national carriers," Smola says.
Outreach is key
Smola specifically emphasizes the need to educate the uninsured about the extent to which subsidies would reduce their health plan costs, the upcoming tax penalties, and the risk that even young, healthy adults may incur medical bills beyond their means.
Those most likely to remain unreachable are those who have family incomes at or below 138% of the federal poverty level and who live in states that have not chosen the Medicaid option, reports the Urban Institute. "Most low-income adults in states that have not opted to expand Medicaid fall into the 'coverage gap' between very low Medicaid income eligibility levels and minimum income levels for Marketplace subsidies," according to the Urban Institute. "For these adults, cost remains an often insuperable barrier to coverage."
The Urban Institute suggests a variety of outreach tactics, including targeting Medicaid-eligible adults; targeting those with limited literacy or education with consumer-friendly information in a variety of formats and languages; having states link outreach efforts to participation in other public benefits programs; improving in-person assistance; and providing easier enrollment technology.
Smola adds that among those who did purchase plans last year and are shopping for new plans, he is seeing that consumers are likely to shift up from Bronze to Silver plans. "People are learning that it's better to trade up," he says.