How to do health insurance auto-enrollment

4/20/2017 09:54:00 AM

Auto-enrollment is a wonky health reform idea that never seems to quite die, despite being too complicated for our current politics to implement. The idea most recently graced the pages of the Wall Street Journal, which proposes that as part of the AHCA, uninsured individuals should be auto-enrolled in mini-med health plans whose premiums don't exceed the size of the AHCA tax credit. There are a number of flaws with this plan, such as the fact the AHCA won't be enough to cover the entire premium for most people, but one of the problems is, as David Anderson says, the insurance market has more churn than a butter factory. This makes it very hard for the government to know who to auto-enroll into insurance plans. Remember that there are special enrollment periods that could strike any time of year, so that decision needs to be made for every single individual in the US every single month of the year.

The WSJ plan is bad. But I think we actually already have all the tools in place to do a workable form of auto-enrollment. We already have refundable tax credits for insurance through the ACA. We already charge taxes on a monthly basis. We already have an annual filing process for retroactively correcting errors in monthly tax payments. We already have a requirement to report month-by-month health insurance status on your taxes. What more do we need? Here's my proposal:

The government would let private insurers bid on pools of uninsured people. The lowest bid wins the contract to cover uninsured individuals in the pool. Premiums (net of premium tax credits) are automatically added to your monthly tax bill unless one of the following apply:

  • you have ACA-compliant insurance in that month and did not use the auto-enroll plan
  • you opted out for that policy year during an open enrollment or special enrollment period

If neither of those apply, then you'd owe the premiums (minus the premium tax credit) as part of your monthly tax bill, and in exchange you can show up to hospitals and receive care with bronze-level coverage.

The nice thing about this is it sidesteps Anderson's concern about the difficulty of tracking who becomes uninsured each month, by making it all retrospective. Insurers don't have to actively enroll anyone—they enroll in the auto-enroll plan upon showing up at a healthcare provider without any other form of insurance. When they file taxes on April 15th, it will become clear which months the individual was on the auto-enroll plan and which months he wasn't. As with all taxes, it's the individual's responsibility to pay the right amount each month, or pay the late penalty if they under-payed in any months. So for example, if an individual had no insurance, didn't opt out of the auto-enrollment plan, but also didn't pay the auto-enroll premiums each month, then they'd owe those premiums (minus the amount of the premium tax credit) on April 15th, plus a percentage penalty.

There's obviously a risk premium arising from the fact that insurers who bid on the uninsured pools won't know exactly how many they might have to cover. That likely means most uninsured people could find a better deal by actively shopping on the ACA market. If we were really clever, we'd put the opt-out form on, at the bottom of the page showing all the insurance plans and prices available to them in their market. Make them scroll through all their other options before opting out entirely.