This is a guest post by Dr. Coleman Drake (@cdrake219), assistant professor at the University of Pittsburgh Graduate School of Public Health, and David Anderson (@bjdickmayhew), a research associate at the Duke-Robert J. Margolis, MD, Center for Health Policy.
In 2019 all Marketplace enrollees in all states are defaulted into automatically re-enrolling into similar plans next year — no further action is required to continue the same policy. Individuals already covered need to explicitly “opt-out” to not be covered next year. This makes coverage continuation a low cognitive load choice.
Before 2018, California’s Marketplace, Covered California, had a wrinkle in its auto-enrollment policy. It did not provide an automatic reenrollment option to households whose insurer from the previous year exited their rating area (i.e., market). During this period, two insurers, Contra Costa and United Healthcare, left six rating areas in California.
In a recent research letter in JAMA-Internal Medicine, we exploited this wrinkle to estimate that losing the option to automatically reenroll in health coverage was associated with a 30 percentage point decrease in the probability that households reenrolled in Marketplace coverage.
Across all years we examined (2014-2017), approximately 123,000 households in the affected rating areas had the ability to automatically reenroll in a plan offered by their insurer from the previous year. But 781 households did not have this option; instead, due to the exits of Contra Costa and United, if they wished to remain insured in the individual market, they had to return to Covered California and actively select a plan for the following year.
Half of the households with the option to automatically reenroll kept coverage through Covered California the following year, while only about 20 percent of households that had to manually reenroll did so. This difference was virtually unchanged after adjusting for household and market characteristics.
A 30-point drop in enrollment is massive. It is similar to an estimate from the Center for Medicare and Medicaid Services (CMS). This enrollment drop has immediate relevance to the ACA as CMS has requested comments on whether and how to continue automatic reenrollment for the 2021 plan year to either improve choices or weaken the ACA risk pools.
More broadly, these findings speak to the fact that administrative barriers affect consumers’ health coverage. Changing administrative barriers in health care will dramatically change consumers’ choices, health insurance take-up, and the composition of risk pools.
We see this most clearly in research on Medicaid administrative frictions. Medicaid enrollment can be made easy, as Louisiana did when they expanded Medicaid in 2016. State officials fast tracked Medicaid expansion enrollment by using Supplemental Nutritional Assistance Program applications and eligibility determinations to automatically enroll individuals who met income qualifications without requiring those individuals to complete any new paperwork.
Medicaid enrollment also can be made more difficult. Tennessee has dropped hundreds of thousands of children previously enrolled in Medicaid due to a convoluted, paper-based process that typically was neither complete nor informative.
This same logic applies to work requirements for Medicaid. Arkansas created substantial barriers to work requirement compliance as the state website was only available during regular working hours in a state with relatively low internet access. Arkansas and other states with work requirements for Medicaid eligibility varied in the frequency of mandatory reporting. Many required monthly check-ins while a few had quarterly or annual reports.
Sommers et al (2019) found significant increases in uninsurance with no corresponding employment effects for the Medicaid Expansion subpopulation most likely to be subject to work requirements. Administrative friction and information costs were leading reasons for failure to comply with Arkansas work requirements. Approximately a third of the targeted adults had not heard of the policy and half of the potentially impacted population was not certain if the work requirements applied to them. One in seven individuals who were outside of the target population also thought that the work requirements applied to them.
Choice architecture, such as the ordering and ranking of plans on a webpage or the underlying rules that govern choices and defaults matter. Their design is critical to a well-functioning health insurance market predicated on consumers choosing highly complex bundles of services. Auto reenrollment lowers administrative burden by reducing search and information costs. However, automatically reenrollment acts against the idea of choice as a means to discipline the market.
Simplified choice sets — for instance, where the worst choices are weeded out and good choices highlighted — will produce higher levels of enrollment, financial protection, and satisfaction. In contrast, spotty information, lack of intelligent defaults, and administrative barriers depress all these.
Automatic reenrollment is just one attribute, albeit an important one, of a supportive health insurance choice environment.