Biden Admin Backs New SEP, but Is Adverse Selection a Worry?

by Leslie Small

The Biden administration on June 28 issued a proposed rule that CMS deemed a "continuation" of the already finalized two-part Notice of Benefit and Payment Parameters for 2022. Among the rule's provisions, CMS proposed to give exchanges the option to implement a monthly special enrollment period (SEP) for people with a household income no greater than 150% of the federal poverty level.

What will insurers say?

• Health insurers that operate on the ACA exchanges have historically supported limiting SEP eligibility due to concerns about adverse selection skewing the risk pool. If people can sign up for insurance at any time and medical underwriting is banned, the theory goes, people will only do so when they need expensive care, thus driving up premiums across the board.

Industry experts' perspectives:

• "If it is effectively an 'awareness SEP' for people who are exposed to zero-premium plans, [it's] neutral to slightly positive," says David Anderson, a research associate at the Duke-Margolis Center for Health Policy. That's because such an SEP is likely to attract people who are "relatively healthy and just fundamentally inattentive," which could potentially improve the overall risk pool, he says.
• "I think any concerns about adverse selection would be very much overblown," says Katie Keith, a research professor at Georgetown University's Center on Health Insurance Reforms. "This idea that folks are out there trying to game the system…I feel like we've advanced since that; that’s the old way of thinking."

Analyst's view:

• "With Medicaid [eligibility] reverifications likely suspended throughout the rest of 2021, there are considerations around the eventual 'cliff' in 2022 when reverifications resume and individuals who continued to receive Medicaid benefits 2021 due to the suspension of reverifications ultimately lose coverage," Citi analyst Ralph Giacobbe wrote in a June 30 note to investors.
• "In this context, we view the proposed rule for a monthly special enrollment period for individuals with low income as a lever to help 'recapture' individuals that lose Medicaid coverage as a result of the resumption in reverifications," Giacobbe added.

From Health Plan Weekly