Proposed Pre-Verification Process for Special Enrollment Periods: Policy Goals, Potential Impact, and the need for State Flexibility

All eyes are on the Trump administration to see whether it will undermine or bolster the ACA marketplaces in the wake of failed congressional efforts to repeal the Affordable Care Act (ACA) and the unlikelihood of legislative action on the ACA in the near future. President Trump has stated that the ACA is “exploding” and “almost all states have big problems.” While independent analyses suggest that the markets are not “exploding,” many would agree there are policy “fixes” the administration can pursue to strengthen the risk pool and ensure continued insurer participation.

The first significant indication of how the Trump Administration will approach the ACA’s marketplaces was published in mid-February, and it demonstrates an interest in responding to the concerns of participating insurers, with a focus on keeping them in the market. For example, in its proposed “market stabilization” rule, the administration attempts to prevent consumers from “gaming the system” by signing up for insurance through special enrollment periods (SEPs) when they are sick and dropping it when they are healthy.

Specifically, the rule would require consumers to properly document their special enrollment eligibility and restricts SEP enrollment opportunities. The Obama administration had also tightened both SEP eligibility and the enrollment process, which we previously blogged about here. However, while the Obama Administration had planned a pilot program to enable data gathering on the effect of pre-verification on special enrollment and the risk pool, this proposal would implement a nationwide pre-verification process without the benefit of data on its potential impact.

Pre-verifying SEP Qualifying Events: Policy Goal and Potential Impact

Under the proposed rule, a pre-enrollment verification process, to begin June 2017, would require all marketplaces using healthcare.gov to pend applications until they can verify the qualifying event of applicants. As part of the verification process, applicants will have 30 days to upload or mail documentation. While the proposed rule also indicates that the marketplace will make “every effort” to verify the qualifying event through “automated electronic means,” such information technology (IT) capacity may not be ready in time for the June roll-out of the program.

Although the goal of the pre-verification program is to prevent individuals from waiting until they become sick or injured to sign up, it could have the unintended effect of deterring healthy individuals who have a qualifying event from enrolling, particularly among younger consumers, ages 18-34. In fact, when the Obama administration began asking for more SEP documentation in 2016, they found that young adults were “disproportionately likely to fail to complete” the process. Yet adults ages 18-34 are more likely to experience qualifying life events like moving, getting married or having a child. There is also very low awareness among consumers that SEPs exist. For example, 26-year-olds had the highest uninsured rate in 2015 among all age groups. Many likely went uninsured because they had aged off their parents’ plan and were unaware of their SEP opportunity for marketplace coverage. To make the special enrollment process more difficult for people will deter enrollment, but investing in more marketing and raising SEP awareness, which neither administration has done, is likely to achieve the goal of a stronger risk pool.

SEP Verification Programs: Issues for States

The proposed rule requests comments on whether state-based marketplaces (SBMs) should be required to conduct pre-verification of SEPs for 2018 coverage. Of the twelve SBMs that use their own enrollment technology platform, only two require applicants to submit verifying documents of qualifying events – Connecticut and Idaho. Idaho also allows insurers to validate life events. Five may require verification of a life event (California, Massachusetts, Minnesota, New York and Washington) after special enrollment and the other five do not explicitly require verifying documentation (Colorado, D.C., Maryland, Rhode Island, and Vermont). Of the twelve, California and Connecticut are considering a pre-verification process similar to the process in the proposed rule. See Table 1 below.

Table 1: Current SBM Verification as of March 8, 2017 (based on availability of public SBM documents)

SBM Requires verification? Description of Current Process
California Yes May require documentation for life events after enrolling through SEP; uses a random sample. If documentation not received within 30 days of notice, marketplace to terminate coverage.

Note that Covered California is currently working to implement a pre-verification process that leverages electronic verifications.

Colorado No N/A
Connecticut Yes Requires documentation for common qualifying events (loss of qualifying coverage, permanent move, birth, adoption or court order, and marriage) or other events the marketplace deems necessary after enrolling through SEP. If documentation not received within 30 days of notice, marketplace to terminate coverage at the end of the month.

Note that a pre-verification proposal  is currently out for public comment to adopt.

District of Columbia No N/A
Idaho Yes Requires documentation and also allows insurers to validate life events and enrollment eligibility.
Maryland No N/A
Massachusetts Yes May require documentation of qualifying events, to be submitted within 90 days or coverage may be cancelled.
Minnesota Yes May require documentation of qualifying events.

If documentation not received within 30 days of notice, marketplace may terminate coverage.

New York Yes May require documentation of qualifying events to health plan.
Rhode Island No N/A
Vermont No N/A
Washington Yes May require documentation of qualifying events to health plan.

Requiring SBMs to adopt the federal SEP eligibility process could undermine their flexibility to develop their own strategies in consultation with their consumers and insurers. For example, while New York does not require pre-enrollment verifying documents, it requires SEP applicants to answer detailed questions and through its eligibility platform can confirm the loss of certain types of coverage without the additional strain on consumers and marketplace resources to request and review documents. New York has found that this process works to ensure the integrity of special enrollment without burdening applicants with paperwork. Similarly, Massachusetts has found success discouraging gaming by requesting documents within 90 days only if its enrollment system cannot verify the applicant’s qualifying event. Additionally, where SBMs have already invested in their own SEP verification systems, those investments could be wasted if they are required to follow a federal model. Other SBMs may lack the IT capacity and operating budget to establish a SEP pre-enrollment verification program and may have other spending priorities, particularly given the lack of evidence that pre-enrollment verification will do much to improve the marketplace risk pool (and may make it worse).

HHS’ proposed rule is expected to be finalized soon, and it is not yet known whether the administration will continue to grant SBMs the flexibility to design SEP eligibility and enrollment protocols that are tailored to local needs and conditions. Given the lack of evidence to support HHS’ proposed approach, and the potential harm it could cause the marketplace risk pools, one can only hope that they will be.

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