Losing Money on the Obamacare Rollover

obamacare-reenrollingWaveland     The window opened on the Affordable Care Act for changes in policies and closed again after a short month. The reports from CMS indicate that some 9 million or so either renewed by their own volition or automatically rolled over their renewal with their existing carriers in mid-December. This is good news, but there are some clouds around this silver lining that are worth tying a reminder around the toe of new enrollees and everyone renewing next year. Bottom line: you may be spending money you don’t need to spend by not shopping on the marketplace to see if better deals have emerged for your health insurance.

James Surowiecki, the financial columnist for The New Yorker, called this the “inertia” factor, just letting the plan rollover for another year because it is such a hassle to go back on the website, reconcile your doctors to the plans, and navigate the myriad twists and turns of these policies. Throughout the year, we’ve referred to this as a consequence of “choice architecture,” providing the semblance of choices and the attraction of going with the default.

The record is clear about the lure of such automatic responses. Surowiecki cites the experience of both the Netherlands and Switzerland. In the Netherlands after managed competition was introduced for health insurers in 2006, “almost twenty per cent of the insured switched after a year. But by 2012, less than four per cent did.” Same-same for Switzerland where research has found the “average switch rate between 1997 and 2007 was three per cent.”

The price of inaction is severe in the early years of Obamacare because new companies are entering the marketplace who had watched and waited during the first year in 2014. Many of them are coming in with cheaper and more attractive benefits in order to catch up and gain a toehold in the healthcare market, and this includes both new players as well as historically big dogs in the business. On the other side of the coin, some of the players from the first year are jumping up the rates and counting on the fact that their new clients have been lured into the renewal pattern already. As the years add up, if anything, this is going to get worse. It’s going to be caveat emptor – let the buyer beware – on steroids.

One study “found that ‘fully informed’ consumers saved a couple of thousand dollars compared with those who were less well informed.” There are some possible fixes for this problem. Just looking is obviously one, but that’s more “I told you so” and a waste of breath, practically speaking, though for new enrollees over coming months, it’s worth remembering. Getting a letter from CMS would be helpful. One study mentioned by Surowiecki found that “when Medicare Part D consumers got a letter telling them that they could save money by changing plans the chance of their actually doing so rose by fifty per cent.” That seems worth a stamp to the troops, doesn’t it? Local 100’s Citizen Wealth Centers are also putting their shoulder to the wheel to help many of the people we enrolled last year.

It’s pretty much either get smart or get screwed now, so it’s worth the effort to not be on the losing end on either health insurance or the price you’re paying for the coverage.

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