Insurance auto-retention policies could halve number of people kicked off coverage

A Massachusetts policy aimed at preventing residents from losing insurance coverage if they miss a premium has cut the number of people kicked off their plans by half, and researchers believe it could improve healthcare access nationwide.

Massachusetts’ auto-retention policy helped 14% of residents stay on a health plan. The policy switches beneficiaries to a free health plan if they miss a premium payment on their original coverage, according to a new working paper by the National Bureau of Economic Research.

Researchers analyzed 2010-2013 enrollee data from the state’s pre-Affordable Care Act health insurance exchange, named Commonwealth Care. Individuals retained—rather than dropped from their coverage—through this policy tended to be younger, healthier and spend less on care than the average CommCare beneficiary, the study said, helping insurers balance their risk pool.

Rather than disenroll individuals who did not pay their premiums for a month, Massachusetts automatically switched eligible, low-income members to a free plan. These individuals carried the debt for their unpaid premiums but retained coverage unless they actively canceled or lost eligibility. If they paid off their debt within 60-days, they could switch back to their old plan.

Most individuals switched plans during the third or fourth month of the year, implying their switch was due to a policy change rather than affordability concerns, the study said. Researchers pointed to the 24% of enrollees who switched plans at the beginning of 2013 after their premiums rose from no cost to $3 per month, compared to the 2.5% of those who switched out of the $3 plan during every other month of the year.

“It is implausible that $3 per month is unaffordable; instead, this must reflect some form of hassle cost,” the study said.

Individuals most commonly didn’t pay premiums because they didn’t receive their bill, set up online payment or forgot to write a check each month, according to the report. Study authors noted this finding echoes a fundamental tenet of behavioral economics: People are often passive and that default policies—what happens when individuals fail to act—significantly impact outcomes. In this case, the result is a loss of coverage.

“Finding a way to withhold or collect premiums automatically—a strategy used successfully by employers and Medicare—would address many of these issues,” the study said.

Studies have shown that those without insurance suffer from worse health outcomes, higher mortality rates and premature death. They also tend to have more expensive medical bills due to undiagnosed or untreated chronic conditions and more emergency room visits. A 2015 study by the National Bureau of Economic Research found that the average uninsured cost hospitals $900 per patient.

For the 12 states that have not expanded Medicaid under the ACA, the study projected they would spend $6.4 billion in 2022 on uncompensated care.

Recently, advocates said they see new political momentum for expanding Medicaid in some conservative states after Congress recently offered them billions of dollars to expand the program under the most recently passed COVID-19 relief belief. Experts are particularly optimistic about states like Alabama and Wyoming, where the debate has been more focused on the state’s share of expansion costs and less on the GOP’s long-held opposition to the ACA.

An analysis from the Kaiser Family Foundation found that the 5% increase in the federal Medicaid match rate that Congress is offering for two years to states that expand is worth about $16 billion, offsetting state costs of expansion in all 12 states.

“I think the dynamics are changing. There is a good amount of Republican support with this,” Jane Adams, campaign director for Alabama Arise and Cover Alabama, two advocacy groups working on Medicaid expansion, told Modern Healthcare in March.


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