With a new Avalere study showing that many Obamacare participants will face premium increases in the fall, the administration's proposed rule that would automatically reenroll Americans in their existing federal health exchange plan is likely to leave many people paying higher premiums than necessary. Plus, Uncle Sam will be unable to verify correct amounts of health insurance premium subsidies. America is not yet ready for auto enrollment in Obamacare.
The proposed rule was announced on June 26, and comments are due in late July.
According to current regulations, people who want to purchase health insurance through the 36 federal health exchanges have to visit, or revisit, the infamous www.healthcare.gov to reenroll this fall. The site is notorious due to its frequent crashes and difficulty of enrollment. Hence the administration's push for automatic reenrollment, in order to avoid the negative headlines that were so common in late 2013 and early 2014.
But health plans are changing, and people might not get the best deal if they are automatically re-enrolled in their current plan. The change will benefit those large insurers that introduced cheap plans in Obamacare's first year with plans to raise premiums later on. Some smaller insurers had planned on undercutting big companies in Obamacare's second year.
Incomes also change, and people should be required to enter their new income in order to receive the correct level of subsidy.
Under most insurance plans, automatic enrollment is taken for granted. With home insurance and car insurance, for instance, the company simply extends your insurance policy, often with some modification of the rates.
Health insurance plans purchased through state exchanges are different, though. The plans have only been offered for a year, and many insurance companies are going to adjust pricing in the second year, reflecting more realistic costs. The cost of some plans might go down, or up.
Before the Affordable Care Act was a reality, companies did not know how many people would sign up, and the ages and health status of these individuals. The older and sicker the pool of enrollees, the higher the medical costs, and the higher the premiums could be in the following year. Furthermore, companies did not know how much health care the new enrollees would use. Greater demand for health care translates into higher premiums in order to cover the costs.
Now that these costs are better known, companies will adjust their premiums, either up or down. Even with the same family circumstances, people should be encouraged to check that the plan they picked in the first year is still the best for them.
According to Tom Miller, a scholar at the American Enterprise Institute, "I didn't actually expect the administration to be quite so bold in automatically rolling over past income reported to a new year...The move could allow insurers to raise rates more readily because consumers may be less likely to leave a plan that has been renewed."
Another major difference between Obamacare and other types of insurance is that most people on the exchanges receive subsidies to purchase the premiums. These subsidies depend on income, and end at 400 percent of the poverty line (about $95,000 for a family of four). Labor force turnover is substantial, with millions of people changing jobs every year.
The involvement of the federal government, and the taxpayer, in premium subsidies means that the administration has an obligation to guide individuals to the health exchange website to declare their income for the purposes of setting the premium for 2015. They are supposed to update income changes to Healthcare.gov, but few are aware of the regulation.
During the enrollment period for 2014 no income verification was required (even though there were penalties for misstating income). Healthcare counselors were filmed by Project Veritas advising people to lie about their income in order to get lower premiums. All the more reason to make people go to the website to verify their income this time around.
The healthcare exchanges are supposed to be set up so that the Internal Revenue Service can automatically check people's incomes. In theory, if people have checked a box allowing the IRS to verify their income, then no further statement of income should be needed. But this is the agency that could not even keep track of the emails of Lois Lerner, director of its Exempt Organizations Unit. No one can seriously believe that it can judge what income people expect to earn in 2015.
Even at the best of times, with the most efficient computer system, the information available to the IRS for sharing with the health exchanges is relatively limited. By October 1, 2014, the official time of enrollment for health insurance in 2015, the IRS would only have tax returns for 2013, two years ago. These were due to be filed in April 15, 2014, or by October 15, 2014 if the taxpayer filed for an extension.
The administration has proposed delaying the enrollment period until November 15, 2014, after the election, to avoid "sticker shock" from the higher premiums. By November 15, the IRS should have received all the 2013 tax returns, but it is unlikely to have processed all of them. In some cases, it might only have income data for 2012.
The speed of IRS verification of income matters because many people have substantial income changes over two years. They can change jobs, lose jobs, get married, get divorced, retire, drop out of the labor force due to discouragement, and have children, all of which affect after-tax income. That is why people who receive health insurance premium subsidies should be required to re-enroll and declare their best estimate of income for 2015.
People have almost three weeks to comment on the new rule. They should tell the administration that it needs to collect updated information on income and choice of plans from Obamacare enrollees. Automatic reenrollment should be considered only when healthcare premiums are more predictable and the IRS has installed a proper income verification system. We have many years to wait.
Original Source: http://www.realclearmarkets.com/articles/2014/07/08/automatic_obamacare_enrollment_is_anti-patient_101164.html