The proposed federal exchange auto-enrollment process: Implications for consumers and insurers

The U.S. Department of Health and Human Services (HHS) has proposed, for the federal health exchange, that the majority of policyholders receiving premium subsidy assistance will be automatically reenrolled in the same plan unless they elect otherwise during the 2015 open enrollment period. State-run exchanges may follow this guidance but also have the option of requiring consumers to reenroll through the exchange or proposing an alternative reenrollment methodology. Approximately 83% of enrollees on the exchanges receive federal subsidies. Policyholders who are automatically reenrolled will receive the same dollar-amount subsidy for 2015 as they did in 2014. In most cases, this will be less than the advanced subsidy that would be applicable if the policyholder enrolls through the exchange in 2015 through the "redetermination" process. The proposed federal exchange auto-enrollment process only impacts a policyholder’s net premium contribution—total premium less Advanced Premium Tax Credit (APTC)—prior to the reconciliation process. Regardless of how a policyholder enrolls in a plan in 2015, the final premium subsidy will be reconciled with enrollees’ 2015 tax returns to ensure consistency with the prescribed subsidy formula of the Patient Protection and Affordable Care Act (ACA).

This Milliman healthcare reform briefing paper summarizes the potential implications for policyholders and insurance companies related to changes in federal subsidies and the renewal process.