Authors’ note:  As we observe in the following post, many additional individuals will become eligible for Marketplace coverage and tax credits during the course of 2014.  We failed to observe, however, that the estimates we present were completed in 2012, before revised final rules on special enrollment periods (45 CFR 155.420(d)(6)) and guidance on hardship exemptions issued this summer further defined the population which can qualify for special enrollment period based on an income change.  (The authors greatly appreciate and would like to acknowledge input and consultation on this issue from the following expert colleagues: Judy Solomon; Sarah Lueck; Brian Haile; George Brandes; Kyla Hoskins; and Timothy Jost.)

These rules and guidance further defined the population which can qualify for special enrollment period based on an income change. This population is limited to  QHP “enrollees” (i.e. those who were already enrolled in a Marketplace plan, and would be eligible to choose another plan during their special enrollment) or  (under the guidance) individuals who were granted a “hardship waiver” because affordable coverage was not available to them before becoming income eligible for a tax credit.

In states which successfully expand Medicaid, this constraint would slightly reduce (by about 10 percent) our estimate of the number of people becoming eligible for tax credits and enrollment in Marketplace coverage over the course of 2014.  (The constraint does not affect individuals who lose eligibility for Employer Sponsered Insurance or Medicaid coverage in which they have been enrolled.)  However, this constraint could substantially reduce the number eligible for special enrollment periods in states which have not expanded Medicaid or in Medicaid expansion states which have not successfully enrolled eligible individuals.  We are not able to estimate this reduction, in part because it depends on the degree to which poor individuals not eligible for Medicaid have applied for assistance or hardship waivers, and whether those who are denied Medicaid are automatically (and/or restrospectively) granted hardship waivers which would make them eligible for a special enrollment period.

The concern and criticisms regarding the federal website problems are well deserved.  It is very important that they be addressed, and that the convenient shopping and enrollment promised for Health Benefit Marketplace (exchange) coverage is achieved as soon as possible.  It is particularly critical that individuals whose existing coverage is lapsed or canceled in December be assured of continuous coverage, despite any remaining problems with that website.

Salient observations on all sides assume that Marketplace enrollment for 2014 will come from those now eligible and in need of such coverage.  The focus is on those who currently have individual coverage which they may be losing, and on the currently uninsured.  To obtain coverage for 2014, such individuals need to enroll during the initial open enrollment period under the Affordable Care Act (October 1, 2013-March 31, 2014).

But our analysis indicates that about as many people will become newly eligible for Marketplace coverage over the course of 2014 as are currently eligible.  As more widespread awareness of the ACA and the individual mandate set in, it is likely that enrollment will continue to “ramp up” over time — as it did when Massachusetts implemented its 2006 reforms.  Thus, Marketplace enrollment from among the “flow” population of individuals who become eligible next year — not just from the “stock” of currently eligible uninsured and individual plan enrollees — will be important to meet program enrollment and risk-pool goals.

Background And Analysis Using SIPP Data

Eligibility provisions in the ACA were designed to meet the changing coverage needs of the many Americans who experience employment, income, and other changes over a given year. The ACA  allows individuals with such qualifying conditions to enroll (through “special enrollment periods”) when they lose other qualified coverage, or when they have an income or family-size change that makes them newly income eligible for federal tax credits (139-400 percent of the Federal Poverty Level in states that expand Medicaid).

The effect of these special enrollment opportunities is likely to be considerable. Applying the ACA program eligibility rules to Survey of Income and Program Participation data, at a given point in time just under 12 percent of adults aged 19 to 64 lack coverage through an employer or Medicaid and have current annual incomes in the subsidized exchange income range.  This roughly approximates the proportion of the adult population that is eligible in November of 2013 to enroll in a subsidized Marketplace plan during the current initial enrollment period.

Our analysis also indicates that 12 percent of non-elderly adults will be eligible for subsidized exchange coverage by the end of 2014, having had full-year incomes in the tax-credit range and lacking employer coverage at year end. But less than half of this total (42 percent) were in the eligible group a year prior.

Of the 58 percent becoming eligible for subsidized exchange coverage over the course of the year, just under half had initial-enrollment-period income less than the 138 percent FPL, meaning that they would be initially eligible for Medicaid (if their state expands the program); then they experienced a rise in income making them eligible for commercial insurance through their state’s exchange.  Moreover, a little over a third of those becoming eligible during the year had insurance through an employer that they subsequently lost over the course of the year, likely due to a change in jobs. The remainder of the group becoming eligible for subsidized exchange coverage during 2014 did not have employer coverage initially or at the end of the year, but had incomes which dropped from above to below 400 percent FPL.

Moreover, a number of the 42 percent initially eligible for subsidized Marketplace coverage would also be eligible to enroll later in the year.  For example, individuals whose income drops from above to below 250 percent FPL will be newly eligible for cost-sharing subsidies, and thus eligible for a special enrollment period.  And those who renewed their individual plan in 2013 will be able to enroll in a Marketplace plan when they lose their previous coverage.

In addition, a considerable number of other individuals will have qualifying conditions not observed in this SIPP analysis. Examples include young adults who graduate and move off of their college plans or who turn 27 and no longer qualify for their parents’ employer coverage, and workers who have employer coverage at the beginning and end of a year, but have a shorter term loss of such coverage.  (BLS data indicate that the median spell of unemployment so far in 2013 is about 16 weeks).

Policy Implications And Additional Evidence

The relatively large number of people who will become eligible for Marketplace coverage over the year due to changed circumstances is not surprising in light of the historically dynamic nature of uninsured status, as well as that of non-group coverage, in the U.S.

For example, a study by Mathematica Policy Research found that 7.7 percent of non-elderly persons were uninsured for the entire year, while on average 15.9 percent were uninsured in a given month, and 27 percent were ever uninsured at some point during the year.  And most people enrolling in non-group coverage have only done so for a limited period of time:  During an average month, 5.3 percent of the non-elderly population had non-group coverage, but only 2.1 percent held non-group coverage for the entire year, and 9.7 percent had non-group coverage at some point during the year.  Finally, while employer-sponsored insurance (ESI) is substantially more prevalent and stable, 56.4 percent held ESI for the entire year, and 76.1 percent held ESI at some point during the year.

The above data make it clear that a sizable number of individuals will become eligible for Marketplace coverage throughout 2014.  In addition, due to the mandate, there is good reason to believe that a significant number will enroll in Marketplace coverage, and that a healthy portion of those will be young adults.

As noted above, many of these individuals will be coming from employer-sponsored insurance, and will often become eligible because of their loss of a job.  A recent analysis of National Health Interview Survey data showed, for example, that among people uninsured for less than a year (roughly 60 percent of the uninsured), the loss of a job was the single most cited reason for coverage loss.  (For a broader discussion, see “Plano, Texas Vs. Revere, Massachusetts: Sorting Through The Differing Causes And Durations Of Uninsurance.”)  For many of these individuals, but in particular for young workers — even for those whose projected annual income is too high to qualify for a tax credit — marketplace plans will offer much less expensive premiums than continuation coverage under the COBRA program.  (See Figure 1 at the end of this post.)  More importantly, these are persons who had opted to participate in ESI and thus seem more likely to participate in (and continue) coverage through the Marketplace, as compared to previously uninsured persons of the same income and age.

Further, younger adults are more likely than older adults to experience the kinds of changed circumstances that make them eligible over the year.  The Mathematica study found that while only 7.1 percent of 40-64 year olds and 11.1 percent of 18 to 39 year olds were uninsured all year, 17.9 percent of the older cohort — compared to 34.0 percent of the younger cohort — were ever uninsured at some point during the year. This suggests that the population which becomes eligible for a special enrollment period during the year may well constitute a younger age profile than does the “stock” population who are eligible during initial open enrollment period.

Our finding that roughly as many individuals will become eligible for enrollment during the course of 2014 as are eligible now for open enrollment may surprise many readers.  Employer plans also have open enrollment periods and allow other enrollment for qualifying conditions, but people joining the plans outside of employers’ open enrollment periods are generally not a significant source of enrollment change.

There are three critical differences here.  One is that the Health Benefit Marketplaces, or exchanges, and the reformed non-group market are new, and participation rates are expected to grow as Americans become more accustomed to reform and the guaranteed access to coverage offered by these venues.  The second is that changes in family income do not constitute a qualifying condition for employer coverage.  The third is simply the much larger number of people covered by employer-sponsored insurance and Medicaid compared to the non-group Marketplace.  The relatively small percentage of workers and dependents who lose ESI or Medicaid over a year constitute a much larger proportion of the population eligible for subsidized coverage in the Marketplace.