The Department of Health and Human Services released proposed regulations this week on the new health insurance exchanges that the Affordable Care Act will set up.  While they don’t address all of the important policy issues related to how these new entities will work, they do lay out when people can sign up for exchange plans and switch plans each year and when their life circumstances change. Overall, the proposals strike a good balance between providing stability for the exchanges and allowing consumers to change or begin coverage outside of the regular enrollment period.

The Affordable Care Act appropriately establishes an initial open enrollment period (before exchanges first make coverage available, starting in January 2014), as well as annual open enrollment periods in subsequent years. In an open enrollment period, people would be free to sign up for a plan or switch plans.  Only in limited circumstances would people be able to enroll in or switch plans outside of an open enrollment period.

This restriction is a critical feature: it ensures that individuals and families don’t wait until they get sick to enroll in coverage, or switch to more comprehensive coverage when they are about to have an expensive medical procedure.  That is a problem Massachusetts initially faced under its health reform initiative, but the state recently tightened its exchange enrollment rules in response to reports that people were enrolling in coverage for short periods and then dropping coverage after receiving medical services.  At the same time, however, it is essential to ensure that people have the freedom to move into coverage or into different coverage when they experience certain changes in their lives in the course of the year.

HHS’s exchange rule proposes an initial open enrollment period that would run from October 1, 2013 through February 28, 2014, with shorter annual enrollment periods (October 15 through December 7) in subsequent years. An extended initial open enrollment is particularly important because individuals and families will need time to understand their new plan options and enroll in coverage when the exchanges get up and running.  An enrollment period of at least five months would also spread out the work of enrolling millions of new beneficiaries through exchanges.

Extending the initial open enrollment into 2014 also is appropriate. Many people may not fully grasp key aspects of the health reform law — such as the requirement for most people to have coverage or pay a penalty and the availability of federal subsidies to help them pay premiums and cost-sharing for exchange plans — until after January 1, 2014.

When Could People Switch Plans Outside Open Enrollment Periods?

The HHS rule also lays out a number of “triggering events” that would allow people to enroll in or switch their exchange coverage during a “special enrollment period” outside the annual open enrollment period.  For example, people who lose job-based insurance, or lose Medicaid coverage because of an increase in income can enroll in an exchange plan.  Other triggering events include marriage, divorce, and the birth or adoption of a child.

Generally, people who switch from one exchange plan to another during a special enrollment period would have to remain in the same coverage level (Bronze, Silver, Gold, or Platinum). They could, for example, change from one Bronze plan to another, but they could not jump from a Bronze plan to a Silver plan (or vice versa) until the next annual open enrollment period.  This restriction is apparently intended to protect insurers from cases in which people discover that they need an expensive procedure or surgery and switch mid-year to a plan with more comprehensive coverage.  But there may be a range of instances when a consumer subject to a special enrollment period should have the ability to change plan levels.  HHS has requested comment on this issue.

The rule does establish a necessary exception to the restriction on moving between coverage levels during special enrollment periods.  A person experiencing a change in eligibility for premium or cost-sharing subsidies would be able to change coverage levels. It is critical to allow switching levels in such instances because, for example, cost-sharing reductions are available only if a person is enrolled in a Silver plan. A person newly eligible or ineligible for premium credits also would need the ability to adjust his or her coverage in response to such a change, even if it means moving to a new coverage level.

As noted, the proposed rule is balanced and appropriate.  But a number of issues have yet to be fleshed out in forthcoming regulation, including how the exchanges and Medicaid will coordinate their work to enable people to move smoothly between coverage sources without gaps.  Such information will help determine whether the federal rules for exchange enrollment periods provide sufficient protections for consumers.