Sunday, June 29, 2014

It's "Government Simple"

Thursday afternoon CMS released a 33 page proposed regulation that will allow individuals who purchased Exchange plans to automatically renew their plan by simply "checking a box on an insurance carrier form and mailing it back". On the surface this regulation appears to make sense. It seems that it would make it easier for the consumer who likes their plan and isn't having a change in their income to receive the same subsidy and benefits.

So what's the big deal? We all like simple. Nevermind those pesky details. On second thought, what are some of those details?

Here are four reasons why automatic renewal isn't going to work.

1. Due to strict actuarial value (AV) parameters and changing limits on certain benefits, the plans offered in 2014 may have to be cancelled in 2015. The plans that do renew will certainly not meet the requirements in 2016. Any time there is a plan change you will either have to pick a new plan or be "mapped" to a plan with the same insurer.

2. Insurance companies are submitting plans and rates right now. Each plan will have different premiums than last year. New companies to the market will add their plans. Let's say you purchased the 2nd lowest cost Silver plan with a premium of $200 a month and based on your income you qualified for a $100 a month subsidy. This year the plan you are in has a premium of $250 per month and it is now the 7th lowest cost Silver plan. A new option is now the 2nd lowest cost Silver plan this year. The premium for that plan is $200 per month. If you automatic renew your subsidy will still be $100. But, the premium you will pay is $150. Talk about rate shock.

3. Changes in income or life status result in varying subsidies. HHS is assuming that your taxable income for the next year is the same. What if you have a baby? What if your 23 year old "child" gets coverage through their employer? What if you changed jobs and got a $5,000 pay raise? Sure, it's simple to keep the same subsidy, but that would be a really tough pill to swallow come tax time.

4. Everyone's situation changes. People develop medical conditions. Others have conditions that are now under control. Changes in health status should be taken into consideration when purchasing a health insurance plan that best fits one's needs. Just because you have insurance doesn't mean you have the right plan at the right price.

The real benefit of automatic renewal is to help insurers and government. It was designed to reduce their administrative costs. It was also designed to help insurers retain business. They are passing it off as a way to simplify your life and renew your insurance without having to deal with again. All of this is being done at your (the consumer's) expense.

As we head into open enrollment season this year, consider items 1, 2, 3, and 4 when renewing (or applying for) your health insurance. Oh, and use a health insurance professional. We value your relationship and your business. These are things the insurance company and government certainly don't.
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