Reform Update: Direct enrollment could become 'Plan B' for HealthCare.gov

To ease insurance sign-ups that have been slowed by federal website problems, CMS officials have announced that individuals and families now can enroll for exchange health plans directly through insurers and still qualify for a federal premium subsidy.

Previously, HHS directed everyone seeking exchange plan coverage and a federal premium subsidy—available to individuals and families earning up to 400% of the federal poverty level—to enroll through a state- or federally operated marketplace.

In actuality, HHS finalized rules on direct enrollment by insurers in August. As Tim Jost, a Washington and Lee University law professor and healthcare reform expert describes the process in a Health Affairs blog, the applicant must start at the insurer's website and provide basic information, then transfer to the exchange website where eligibility for premium tax credits is determined. Then the applicant returns to the insurer's website for plan selection.

HHS has announced it will permit direct enrollment in the 36 states served by the federal exchange. But it's up to each state-run exchanges to decide for itself whether to allow it, Jost said. Consumers also can sign up for exchange health plans through insurance agents and brokers who have received exchange training and certification.

Given the ongoing difficulties of the federal website, direct enrollment through insurers could prove to be an important alternative method for allowing large numbers of individuals to sign up for coverage. But it remains to be seen how well federal officials and insurers can make this work.

“It's the best Plan B if the federal government cannot get HealthCare.gov functional by the end of November,” said Joel Ario, managing director at Manatt Health Solutions and former director of the HHS office of health insurance exchanges. “That can be the solution that allows a large volume of people to be enrolled.”

Robert Laszewski, a consultant who works with insurance companies, agrees that it's an important development. “The insurance companies have been screaming for it for months,” he said. “It should have been the Plan B backup on October 1.”

But there are significant caveats. Laszewski said his informal survey of insurers since Tuesday suggests that the CMS officials were overstating the viability of this workaround for individuals who are eligible for subsidies.

Ario shares this concern. “I hear the carriers are not fully confident that that will work,” he said. “What happens when there gets to be a large volume?”

The CMS did not respond to a request for comment by deadline.

Some consumer advocates fret that having people sign up directly through insurers undermines one of the advantages of the online marketplaces, since consumers will only see the plan options offered by that particular insurer and won't be able to comparison shop for the plan that best meets their needs in terms of benefits, premium, cost-sharing and provider network.

But the HHS final rule does require insurers to inform all direct-enrollment applicants that other qualified plans are offered by other insurers through the exchange, and to give them an opportunity to view the premiums, benefits and other features of those other plans.

Jost wrote that direct enrollment will facilitate getting as many people enrolled in coverage as quickly as possible. While the direct enrollment portal hasn't been working well up to this point, HHS said it has fixed some of the problems, and insurers are checking to see if they can make it work.

“If direct enrollment can be made to function properly, it is likely that we will see a surge of direct enrollments between now and the end of the year, and on through the open enrollment period,” he wrote. “In particular, it is likely that many individuals who have received notices that their 2013 plans are no longer available will be directed by insurers to 2014 plans, with premium tax credit subsidies, though direct enrollment.

Nearly three quarters of customers who purchased plans through the individual market will be eligible for federal premium subsidies under the federal healthcare law, according to a new report by Families USA, a group that favors coverage expansion. Individual enrollees make up just 5.7% of the overall U.S. health insurance market, and only about one-third of those customers remain in their plans for more than a year, the report said.

The individual market has been the focus of intense media and political attention because hundreds of thousands of subscribers have received cancellation notices in recent weeks for plans that don't meet the mandates of the Patient Protection and Affordable Care Act. Last week, President Barack Obama announced that insurers firms would be allowed to renew non-complying plans in the individual and small group markets through 2014.

Ron Pollack, executive director of Families USA, said that many of the products offered on the individual market are “Swiss cheese” plans that don't provide reliable coverage. “The individual marketplace has often been considered the wild, wild west of health insurance,” he said.

The data used in his organization's report was from 2010 and 2011.

Pollack said most individuals will be able to purchase cheaper, more comprehensive plans through the state and federal health insurance exchanges and that worries about cancellations have been overstated. For one thing, people who renew their non-compliant plans will not be eligible for federal premium subsidies that could significantly reduce their cost.

“I believe these concerns have been blown out of perspective,” he said.

Sen. Orrin Hatch (R-Utah) and four of his Republican colleagues wrote to HHS Secretary Kathleen Sebelius on Wednesday seeking reassurance that nearly $2 billion in loans to the newly established, not-for-profit CO-OP health plans will be repaid. The consumer operated and oriented plans (CO-OPs) were established under the ACA. The Republicans cited a pair of reports from the HHS inspector general's office highlighting financial risks for the startups as a cause for their concern. The other signers were Sens. Lamar Alexander (Tenn.), Mike Enzi (Wyo.), Tom Coburn (Okla.) and Charles Boustany (La.)

Follow Paul Demko on Twitter: @MHpdemko