What You Need to Know About Obamacare Renewals

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The Effects of Automatic Renewal on Obamacare Premiums

medical-advocacy_184778363Plans to re-enroll individuals and families into the same health insurance plans they subscribed to through the federal exchange last year have been made. This may come to the dismay of many who overlooked the option to opt out, who do not plan to keep the same insurance plan they had last year, or who know their subsidy qualification status has changed.

The Obama administration, however, seems to have cleverly answered these issues with less than four months left before open enrollment begins.

As we inch our way toward Obamacare’s second open-enrollment period, those who purchased a health insurance plan from the federal marketplace without deliberately opting out of the automatic renewal option should stay abreast of all of their health insurance enrollment options. Once open enrollment is over, individuals and families will be stuck with their plan whether they like it or not.


What’s Happening with Renewals?

Sylvia Mathews Burwell, Department of Health and Human Services Secretary said, “As we plan for open enrollment in year two and continue to build a sustainable long-term system, we are committed to simplifying the experience for consumers by allowing auto-enrollment.”

Automatic health insurance plan renewal will occur for anyone who does not go in and change it themselves so long as they remain qualified and the plan they originally had is still available.

As it stands, about 95 percent of those who enrolled in an Obamacare insurance plan on the federal exchange are considered eligible for the same plan they had last year and will not have to do anything in order to stay right where they are.

If they choose to change plans, however, they can do so during open enrollment, which begins November 15, 2014 and remains open until February 15, 2015.

obamacare renewalOne of the Obama administration’s ideas behind automatic renewal is to reflect the efficient way in which an employer-sponsored healthcare plan seemingly renews itself.

While this may sound like great news to those who do want to stay put, or for those who weathered the infamous technical meltdown earlier on, this could actually cause premium increases for many consumers who do not switch their plan if premium rates spike as projected.

Supporters of Obamacare are pleased with auto renewal as they previously demonstrated concern about whether or not enrollees would go back to Healthcare.gov and re-enroll themselves for 2015.

Medicaid enrollment has had similar issues, and supporters feared that not only would they be burdened with trying to sign up more people for Obamacare who are currently uninsured, they would also have to try reaching current customers to remind them to renew their policy.


How Does Automatic Renewal Affect Subsidies?

Allowing automatic renewal for consumers’ health plans isn’t all they’re putting on autopilot. Understandably, people want to know that their subsidies won’t be dropped by oversight or glitches. Furthermore, a concern among Obamacare supporters is that people would lose their subsidies if their eligibility couldn’t be automatically renewed.

This fear is likely based on the idea that some may not bother going through the trouble of providing the same income information they did when they initially enrolled.

The good news is that about 90 percent of those who purchased a health insurance plan on HealthCare.gov received subsidies due to their income falling between one and four times the federal poverty level, and these subsidies are available for automatic renewal.


As a result, many won’t have to jump through the same hoops they did when they initially applied. This helps the consumer and the federal exchange streamline re-enrollment in a major way.

In a press release, HHS stated that “Consumers in the federally-facilitated marketplace will receive notices from the marketplace informing them how to update their information to get a tailored and updated tax credit that keeps up with any income changes.”

Officials recently disclosed that an investigation of financial records indicated about 95 percent of enrollees from the federal exchange will be renewed not only for health insurance but for subsidies as well and will automatically receive the payment assistance that they received last year.

Those who do not go back to the website to report income changes will have their subsidies renewed based solely on the records that the government has concerning their income.

Officials have said that even if a consumer’s eligibility for subsidies changes, they will still be re-enrolled in the plan they opted for last year unless they previously chose to opt out of automatic renewal.

If a person no longer qualifies for the subsidies they qualified for last year, switching plans during open enrollment may be advisable. Otherwise, they will be automatically re-enrolled in the same health insurance plan they had last year – regardless of the cost.


Insurers Benefit

Larger insurers are likely to be pleased with automatic renewal because they believe many of their customers will just stay where they are. Those insurers are also the ones that gobbled up most of the market during the first open enrollment period, and they have proposed pretty weighty premium increases.

Whether or not giant increases will be allowed remains to be seen as increases of over 10 percent are typically scrutinized, and the insurance company must show just cause for hefty cost increases.

The smaller insurance companies, especially those just entering the marketplace, definitely want to be competitive. They could be at a disadvantage, though, because of consumers either not wanting to switch plans or not knowing that they can.

An analysis by Avalere Health showed that some rate increase proposals could mean up to 60 percent increases for some consumers’ premiums if they don’t find a less expensive option.

avalere analysisIf light isn’t properly shone on the smaller companies with less expensive plans, and consumers aren’t willing or motivated to go through the steps to change plans, the larger companies won’t have an immediate need to be competitive and consumers and smaller insurance companies will be at a vast disadvantage.

Health Law Professor at Washington and Lee University School of Law, Timothy Jost, said that despite automatic renewal on the federal exchange,  “I think there will be quite a bit of movement among plans.”

He believes that, because of proposed rate increases among the bigger insurance companies, consumers will be inclined to shop for cheaper health insurance plans.


State Exchanges Lacking Subsidies

The ability to automatically re-enroll in both health insurance plans and subsidies is only applicable to those enrollees on the federal exchange. Fifteen healthcare exchanges that are run by their individual states do not have this option.

States that run their own marketplaces will be able to call some of the shots for their renewals, which includes methods of obtaining coverage for next year.

The state exchanges have the ability to provide automatic renewal for insurance plans either by offering the renewal of health plans only, offering the renewal of subsidies only, or creating their own system that must be taken through an approval process by the Centers for Medicare and Medicaid Services.


Technology Perks

The Obama administration clearly sees automatic renewal as a way to minimize technical challenges with the website and resulting frustration. Obviously, the automatic renewal of millions of plans will put a sizable dent in the amount of traffic on the federal exchange when open enrollment begins in November, and will likely result in a much more streamlined experience for those who must use it.

Ron Pollack of Families USA said, “I think this was the best choice that could be made, and it will enormously reduce churning that was experienced in the past.”

Based on the information provided and analyses completed, it appears that without millions of motivated bargain shoppers leaving higher-cost plans for less expensive options, consumers could see extreme hikes in premiums and out-of-pocket costs.

It could, however, go the other way. If consumers start to get a taste of equal health insurance plans for less money, larger companies may be forced to be more competitive with their pricing.

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