Central to the Trump administration’s approach to reforming the non-group commercial medical insurance sector is assuring its actuarial stability by incentivizing those who obtain individual coverage remain continuously enrolled. Continuous enrollment is critical to a viable insurance market because it enables health plan issuers to assume a predictable flow of premium dollars to cover the cost of medical care events and predict the likelihood and cost of those events over a given period. That policy goal is contained in the American Health Care Act, the budget reconciliation measure currently pending in Congress that would authorize health plan issuers to surcharge applicants who had a break in coverage, as well as the Department of Health and Human Service’s proposed Market Stabilization rulemaking.
The question however is whether a continuous enrollment incentive will achieve its goal and meaningfully contribute toward creating a more actuarially stable individual risk pool. Particularly given that the segment serves as a relatively small remainder market for people not covered by employer-sponsored group plans that continue to dominate among working age individuals and the government programs Medicare and Medicaid.
Enrollment in the non-group segment is inherently volatile. People shift out of the non-group market as they become eligible for one of these other forms of coverage. Many young invincibles – those age 30 and under – don’t see much need coverage in the first place. Simply paying a 30 percent premium surcharge for a year doesn’t really offer much incentive to enroll in coverage. If the young invincibles lack incentive to enroll, that also works against another critical component in the individual (or any) insurance market – risk spreading – because the pool could tilt toward older members.
If continuous enrollment ultimately proves to have little impact in terms of improving the individual risk pool – and there’s a good chance that will be the case – policymakers will need to consider the larger issue of whether the non-group market can continue to function as a voluntarily enrolled form of insurance (like life insurance, for example). Will involuntary, automatic enrollment be necessary in order for it to be a viable risk pool for those not under the big tents of employer-sponsored or government coverage? And how might that work? Might all adults age 18 to 65 be automatically enrolled and subject to payroll and self-employment taxes as the financing mechanism such as with Germany’s universal coverage system? How might automatic enrollment as a government program comport with the commercial model used for non-group medical coverage? Would commercial non-group market players be content to relinquish the enormous challenge of maintaining an actuarially viable risk pool and transfer their risk bearing function to the government and act solely as plan administrators? Or might it be structured like Medicare, where commercial plans can assume some degree of risk to offer more generous plans such as Medicare Advantage plans?
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