If HHS Secretary Sylvia Mathews Burwell was listening to NPR's "Morning Edition" on Tuesday, the first day of 2017 open enrollment, she must have felt sick.
On the broadcast, Will Denecke, a self-employed urban planning consultant in Portland, Ore., said he planned to skip buying health insurance for 2017 because the premium had shot up to $930 a month. Instead, the 63-year-old man said if he developed a medical issue sometime during the year, he would go to the Affordable Care Act marketplace and buy a plan outside the open-enrollment window, which he's aware he's not supposed to do.
He said the ACA rules sharply limiting such midyear enrollment are easy to get around. Last time he simply claimed a change of income. “I've done it before, and my broker helped me,” he boasted, while admitting, “I know that undermines the economics and premise of the ACA."
That's precisely the type of consumer gaming that's producing heartburn for the Obama administration. Insurers complain it's causing them serious financial losses in the ACA-regulated individual markets. Such abuses are one factor prompting widespread calls for federal policy changes to stabilize the exchanges.
Meanwhile, because of the sharply rising 2017 premiums, healthier consumers increasingly are gravitating to cheaper short-term health plans that don't meet ACA rules. The growth of such plans, which as many as 1 million people have purchased, could further undercut the ACA markets.
Brokers say this trend reflects the turmoil in the individual market. “I've got clients saying, 'The prices are nuts and I won't pay it, I'll pay the penalty,' ” said Lisa Lettenmaier, a broker who owns the HealthSource Northwest brokerage in Portland and who spoke during a short break in the hectic first day of open enrollment.
In June, HHS tightened documentation requirements for consumers seeking to enroll in so-called special enrollment periods triggered by life changes such as marriage, divorce, job loss, birth of children and relocation. But insurers say even tougher measures are needed to prevent people from buying coverage outside open enrollment when they need expensive medical care. That behavior negatively skews the actuarial risk pool and undermines the market.
Over the past year, insurers and the federal exchange have stiffened documentation requirements for people who apply for coverage both during open enrollment and in midyear special enrollment, said David Taxer, who owns the Portland Benefits Group brokerage. He doubted that legitimate brokers were helping clients game the special enrollment rules because they could lose their licenses.
Still, some people have exploited loopholes allowing them to buy coverage midyear, Taxer said. For instance, they've moved their address of record across the Columbia River from Portland to Vancouver, Wash. Until this year, Oregonians with incomes above the Medicaid level were able to apply for Medicaid, receive a denial letter, and use that denial to qualify for midyear enrollment in an Obamacare plan. State officials recently cracked down on that scam.
Now, because of the rising 2017 rates, most of Taxer's clients who have incomes too high to qualify for ACA premium tax credits are buying cheaper, short-term health plans that do not comply with ACA rules. In the Portland area, rates for these plans, which can run for up to 364 days, are $500 to $600 a month, about half the price of ACA-compliant plans, whose premiums are up 10% to 30% for 2017.
These short-term plans often have broader provider networks. But insurers can turn down applicants with pre-existing health conditions, and the benefits can be much more limited than in ACA-compliant plans. Consumer advocates warn that such products offer tenuous financial protection.
Buying a short-term plan exposes consumers to the ACA's tax penalty for not having ACA-compliant coverage. But people buying short-term coverage can exploit yet another loophole to evade the tax penalty, Taxer said. They can apply for the ACA's financial hardship waiver, which is based on any of 14 claims such as domestic violence or receiving a shut-off notice from a utility. These often require no documentation.
“That's a big loophole,” Taxer said. “Then you can buy whatever you want.”
Last month, HHS and two other federal agencies issued a final rule that limits short-term plans to no more than three months, effective April 1. HHS said sales of such plans have reduced the number of people in the ACA risk pool and increased costs for everyone. But the rule wouldn't prevent consumers from repeatedly buying 90-day plans. The rule also may face a court challenge from insurers or conservative groups.
Taxer said trying to regulate away short-term plans doesn't help consumers who are increasingly desperate for affordable coverage. “We're at the end of the Obamacare era,” he said. “We'll either go back to the old system or go to Hillarycare, depending on who wins the election.”