Reform Update: ACA automatic re-enrollments seen as easing election uncertainty

Obamacare supporters welcomed HHS' proposal Thursday to automatically re-enroll consumers in health plans on the federal insurance exchange in 2015 to avoid mass confusion and many people dropping out of coverage. But both supporters and critics say the proposal could increase costs for many consumers if they don't shop around and exercise the option to switch plans.

About 95% of federal exchange customers will be eligible to be automatically re-enrolled in their private plans for next year, HHS said. That could help avert headaches for consumers, insurers, exchange officials and healthcare providers, who don't want to see patients drop coverage. Unless consumers file new enrollment and income information for 2015, the government will use their income information on file from 2014 to set their federal premium tax credit.

Experts predict many consumers will accept the re-enrollment and not choose a different plan, even if they could get a better deal on premiums and benefits. Research has shown that only about 5% of Medicare Advantage enrollees and Medicare Part D drug plan enrollees change plans each year, even though switching often would be a better deal. If the same holds true for Obamacare exchange customers, that will be good news for insurers, including many Blues plans, that established dominant market shares in the exchanges this year. But it's potentially a problem for insurers that struggled to draw customers during the initial sign-up period or are planning to compete on the exchanges for the first time during the 2015 enrollment period.

But there are concerns that consumers may belatedly find out that the federal premium subsidy they received was either too high or too low. If it was too high, they will have to refund the overpayment to the Internal Revenue Service. If it was too low, they would have paid too much out of pocket for the premium, though they can apply for an adjustment at the end of the year.

The proposed rule reduces the potential for mass confusion about re-enrollments just ahead of the November congressional elections, as well as the potential for people inadvertently dropping coverage and causing a big increase in the uninsured rate. Many consumers who are new to the individual insurance market may not realize they have to re-enroll. Consumers will receive notifications from HHS about their 2015 options in the weeks before heading to the polls. It is expected to reduce the strain on the HealthCare.gov federal enrollment website.

"They're trying to reduce disruptions in the marketplace by basically allowing people to do nothing and stay insured," said Caroline Pearson, a vice president at the consulting and research firm Avalere Health. "That avoids having people inadvertently fall out of coverage."

The proposal is welcome news for enrollment outreach workers, who are prohibited by federal law from maintaining data on individuals that they help enroll in coverage. That means they have no means of reaching back out to those individuals to make sure they have signed up for 2015 coverage. Automatic re-enrollments will eliminate the headache of trying to figure out a way to communicate to those individuals about their coverage options going forward. In addition, it will reduce the burden on healthcare providers in getting their low-income and uninsured patients to sign up.

Congressional Republicans were muted in their response to the proposed rule. Medicare Advantage has a similar system of automatic re-enrollment, where beneficiaries who take no action during the annual open enrollment simply remain in their current Advantage plan. That's generally also true for workers in employer health benefit plans.

In addition, the concept of automatic enrollment has some bipartisan support. Some Republicans have proposed auto-enrollment, with an opportunity to opt out, for employees in company health benefit plans as a way to increase coverage without a mandate.

But automatic re-enrollment raises the possibility that some consumers will see their premiums increase significantly if they don't take the initiative to switch plans. 2015 rate filings so far around the country show insurers raising their rates at sharply different levels, with some even cutting rates.

In addition, the amount of the federal premium subsidy available to individuals with incomes up to 400% of the federal poverty level is likely to change based on changes in the premiums of the benchmark health plans. The amount of the premium tax credit is tied to the cost of the second–lowest-cost silver plan in each market. As plan premiums change, so will the subsidy. Consumers who are automatically re-enrolled may find their subsidy has decreased and their premium contribution has increased, in which case they might do better shopping for a cheaper plan.

A study released by Avalere on Thursday found that in six of nine states analyzed, the 2014 benchmark silver plan will change in 2015 under premiums proposed by insurers.

Pearson said that there will need to be efforts to educate consumers about these changes so that they don't experience sticker shock when they get their first premium bills for 2015. "You know that people aren't apt to re-shop," she said. "So you need to educate them and encourage them to do so if they want to be price sensitive."

America's Health Insurance Plans, the main industry group, was cautious in its response to the proposed rule. "While we're still reviewing the details, we appreciate that HHS is taking steps toward simplicity and stability for consumers," the trade group said in a written statement.

One ramification of automatic re-enrollments is that the process is likely to result in more individuals receiving subsidies they aren't eligible for, said Joe Antos, a healthcare policy expert at the conservative American Enterprise Institute. That could lead to a messy process where individuals file their taxes and find out that they owe money because their subsidy was too generous. "This will be a catch-up game from the very beginning," Antos said "There's really no question that the IRS has a problem there."

Tim Jost, a Washington and Lee University law professor and healthcare reform expert who supports the law, shares concerns about the federal government's ability to handle the administrative and technological burden—especially given the troubled rollout of the exchanges last year. "They should have learned a lot in the last year," Jost said. "I'm praying that they'll be up to the task but it's going to be a monumental job."

A conservative analyst criticized the automatic re-enrollment proposal. “What would have surprised me is if they had respected individual freedom,” said Dean Clancy, a former senior White House health policy official in President George W. Bush's administration.

U.S. Rep. James Lankford (R-Okla.) won a toughly contested GOP Senate primary in Oklahoma on Tuesday. Lankford prevailed over former state House Speaker T.W. Shannon by a surprisingly lopsided 56%-36% margin. Lankford is seeking to replace retiring Republican Sen. Tom Coburn in the heavily Republican state. Lankford currently chairs the House Oversight and Government Reform Committee's Energy Policy, Health Care and Entitlements Subcommittee.

Maryland Lt. Gov. Anthony Brown won a commanding victory in the Democratic gubernatorial primary on Tuesday despite strong criticism of his oversight of the state's problem-plagued health insurance exchange. Brown prevailed by a more than 2-to-1 margin over his nearest competitor, Attorney General Doug Gansler. Gansler had sought to make Brown's stewardship of the Maryland Health Benefit Exchange a liability in the contest, but the issue never gained traction with voters. Brown is widely expected to prevail in the general election.

Follow Paul Demko on Twitter: @MHpdemko