The Centers for Medicare and Medicaid Services (CMS) came out with some final stabilization rules. One component of the ruling now makes it more difficult to qualify for a special enrollment period (SEP). Essentially, an SEP enables people, who couldn’t get coverage or lost coverage outside of open enrollment, to enroll in a qualified health plan (QHP).
During the first few years of Obamacare, Healthcare.gov gave out SEPs liberally to people who didn’t qualify. There were loopholes in the system, and people found them. With so many people gaming the system, the risk pool became increasingly imbalanced. In other words, people would wait until they were sick to enroll in coverage; then once they received treatment and get well, they’d drop the coverage. This not only hurts the risk pool, but it also has significant financial repercussions on insurance companies. For example, let’s say someone with cancer gets a health plan that costs $1,000 per month. After six months of cancer treatment, they get better so they drop the coverage. Though they only paid $6,000 for six months of treatment, the insurance company now has to cover upwards of around $250,000 in medical costs for the cancer patient, who is now no longer a policy holder. When several people work the system like this, meaning they only get insurance when they’re sick, insurance companies combat their losses by increasing rates across the board.
This issue has been a prevalent issue under the Affordable Care Act (ACA). Insurance companies are losing money so they’ve had to raise their rates exponentially. Since 2010, the rates have more than doubled for qualified health plans. In addition to raising rates, carriers have also been leaving the market because they can’t sustain any more losses. Either way, consumers lose; they either have unaffordable healthcare, or they have no healthcare options.
By being more strict with regards to SEPs, CMS is hoping to resolve this issue. In order to qualify for an SEP, an individual must now provide proof that they’ve lost their health coverage involuntarily. If the proper documentation is not provided, then a person cannot qualify for an SEP.
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