Rule Change Could Lead to Savings, Dilemmas for Insurance Customers

Andrew Kitchenman | November 25, 2014 | Health Care
Option to switch to lower-premium health plans could lead to losing network doctors

ACA silver plan
New Jerseyans who buy insurance on the federally operated health insurance marketplace could save money, but unwittingly risk losing access to their doctors, under a newly proposed federal regulation.

According to the proposal from the federal Centers for Medicare and Medicaid Services (CMS), new enrollees in the marketplace would be given a new option that would allow them to automatically move to plans with lower monthly premiums if their current premium is raised in the future.

The option would be available when consumers first enroll, but wouldn’t go into effect until it was time for them to reenroll a year later.

This option isn’t available for the open-enrollment period that started on November 15 and will last until February 15. Currently, individuals and families that are enrolled in marketplace plans automatically reenroll in the same plan the following year, if they don’t return to the marketplace to change their coverage.

This will lead to significant premium increases for some residents. For example, those who chose the AmeriHealth New Jersey’s popular Silver Tier 1 Advantage plan will see an automatic 11.7 percent increase in their premiums starting on January 1. For example, a 45-year-old resident will see his or her monthly premiums climb from $358.79 to $400.75. The “silver” in the title refers to the level of coverage, with silver plans requiring consumers to pay 30 percent of the value of the plan out of pocket, after paying the premium.

But if these consumers were allowed to automatically reenroll in the lowest-cost silver plan in 2015, the Silver plan from Health Republic Insurance of New Jersey Spotlight (not affiliated with this organization), they would actually see a 0.9 percent reduction in their premiums. For a 45-year-old, the premiums would drop from $358.79 to $355.56.

“Overall, it’s probably positive,” said Raymond J. Castro, senior policy analyst for New Jersey Policy Perspective, a nonprofit research organization. “Like everything else in healthcare, it’s complicated.”

Allowing residents to automatically change their insurance plans based on premiums alone could cause problems for some people. They could lose access to their doctors or nearest hospitals if these providers are in their current plan but aren’t in the plans with lower premiums.

That’s why policy experts have urged consumers to return to the marketplace website,, annually to buy the insurance plan that best meets their needs. The site includes links to insurers’ websites, where consumers can check to see if their healthcare providers are in the plans’ networks.

There are factors other than premiums that consumers may want to consider.. For instance, changes in household income could lead them to want higher or lower tiers of coverage. There are four tiers in the marketplace: those with lower premiums have higher out-of-pocket costs to consumers in the form of copayments (payments for each healthcare service), deductibles (an amount that must be paid each year before insurance kicks in), and coinsurance (a percentage of healthcare costs that must be paid by the patient).

Bronze plans require consumers to pay an average of 40 percent of the value of the plan; silver plans, 30 percent; gold, 20 percent; and platinum, 10 percent. The rule change wouldn’t move consumers between tiers, but would shift them to plans in their current tier with lower premiums.

CMS officials said in announcing the proposed change that they want to ensure that consumers understand the risk of being automatically reenrolled in a plan with a significantly different provider network, benefits, cost-sharing structure, or service area.

The proposed rule change takes into account two additional factors: 1) consumers largely chose plans with low premiums in the first open enrollment period, and 2) many are unlikely to actively seek out new insurance plans each year.

“Because we believe that many consumers place a high value on low premiums when selecting a plan, we believe that consumers could benefit” from the automatic reenrollment change, CMS officials wrote in the notice announcing the proposal.

Joel Cantor, the director of the Rutgers Center for State Health Policy, noted that the government’s previous experience with the Medicare Part D program has shown that consumers are unlikely to shop for new insurance each year, so over time they may end up staying in a plan that is not the best fit for them.

“On the one hand, it would help overcome the ‘status quo’ bias that people tend to have,” Cantor wrote in an email. “But there is also considerable risk in it, because the lower-cost plan might have a different provider network and higher cost sharing. It would still be best for consumers to look at their options each year, but this option is likely to be reasonable for some people.”

The marketplace is a central provision of the 2010 Affordable Care Act. In the first open enrollment period, which ended in April, 161,775 residents enrolled in insurance through the marketplace.

Castro said a strength of the ACA is that it doesn’t require consumers to take actions to reenroll each year, since such a requirement would inevitably cause some people to lose their insurance. But automatic reenrollment does have a downside, since it could lead to double-digit annual premium increases for those who don’t make changes, he noted.

“The intent of the Affordable Care Act is to have affordable health coverage,” Castro said. “I think this rule helps our nation to move more in this direction.”

Details of the new regulation will draw on input from insurers and others who submit comments. The proposal said that the automatic switch to a lower-premium plan could be triggered by an increase reaching a certain level, such as a 5 percent or 10 percent increase over the previous year. In addition, the final version of the rule change could automatically shift the consumer to the plan with the lowest premium, or it could randomly assign him or her to one of the three lowest-premium plans. Consumers would still have the option of changing their minds and keeping their current plan or moving to another plan of their choice.

If the proposal is enacted, it would be more than two years before it would affect. That’s because the first opportunity for consumers to express their preference to be automatically shifted to lower-premium plans would be in the next open enrollment period, which is scheduled to last from October 1, 2015, to December 15, 2015. Then, the next opportunity to reenroll would be following year, starting on January 1, 2017.

Castro said the importance of the rule change may be reduced over time, as insurers gain more experience in setting premiums for the newly insured population. Determining these rates was particularly difficult in the first two years of the marketplace, as insurers learned about the health needs of their new members.

“It’s going to start to become more stable and it’s going to start to become more like the stability that we saw in the individual market” before the marketplace launched, Castro said, adding that until that stability occurs, healthcare advocates will continue to urge residents to take the time to shop for marketplace insurance each year.

The rule change is part of a wide-ranging set of proposals announced by CMS on Friday. The government is also seeking to require insurers to be more transparent in the factors that go into setting premium rates.