Open Enrollment is Coming - Don't Auto-renew!

Most 2015 enrollees CAN auto-renew. But that doesn't mean they SHOULD

Obamacare open enrollment - don't auto-renew
Log back into your account by December 15 to select the plan you want to have in place on January 1. Tetra Images/Getty Images

For people who buy their own health insurance, open enrollment for 2016 is just around the corner.  It starts on November 1, and continues until January 31.  During that time you can select any plan available in your area, on or off the exchange (premium subsidies are only available for plans purchased through the exchange).

If you’re currently uninsured, you’ll definitely want to buy a plan during open enrollment.

 If you don’t, you won’t have another chance to get coverage in 2016 unless you have a qualifying event, and the penalty for being uninsured in 2016 is going to be much higher than it is in 2015.

But what if you already enrolled in a plan this year and you’re happy with it?  Do you need to do anything during open enrollment?

Most people have access to auto-renewal

As of June, there were almost ten million people with in-force private plan coverage through the exchanges. Enrollees in Hawaii must re-enroll using the platform instead of Hawaii Health Connector, so they aren’t eligible for auto-renewal. And people who are enrolled in a plan that's terminating at the end of 2015 obviously wouldn't be able to auto-renew (this applies to several CO-OPs across the country).  

For most other enrollees however, auto-renewal is available.  But it’s certainly not in your best interest to let your plan renew without shopping around.

But auto-renewal isn't your best choice

Nearly 84% of the current exchange enrollees are receiving premium tax credits (subsidies) to make their coverage more affordable. Premium subsidies are designed to ensure that the premium for the second-lowest-cost Silver plan in your area doesn’t exceed a set percentage of your income, assuming your household doesn’t earn more than 400% of the federal poverty level.

 Once your subsidy amount is determined, you can apply it to any “metal” plan in the exchange.

But if the price of the second-lowest-cost Silver plan changes for 2016, your subsidy will change too. When combined with premium changes that are all over the map for 2016, people who let their 2015 coverage auto-renew could end up with a surprising premium invoice for January.

And if you get a letter from the exchange or from your health insurance carrier, pay attention to the details. Some people who are currently receiving subsidies won’t continue to get subsidies in 2016, even though their coverage is otherwise eligible for auto-renewal. That means they'll get a bill for the full premium in January - and the average subsidy recipient is only paying 28% of the full cost of the plan, so a bill for the full premium would certainly result in sticker shock. 

There are several scenarios where coverage could be auto-renewed but without subsidies (The Insider's Guide to Obamacare's Open Enrollment has more details about this):

  • People who got subsidies in 2014 and failed to file a 2014 tax return and/or form 8962 
  • Enrollees who didn’t give the exchange permission to verify updated tax return data when they initially enrolled.
  • Enrollees whose 2014 tax return indicated a household income above 500% of the poverty level.

Premium changes across the land

For everyone else, as long as your existing plan - or a replacement designated by your carrier - is still available in 2016, it’s possible to just skip open enrollment altogether, keeping your current plan and subsidy for 2016. But across metropolitan areas in 49 states and DC, the premiums for second-lowest-cost Silver plans - upon which subsidies are based - will fluctuate as much as 10% lower for 2016, and as much as 38% higher.  Overall rates appear to be increasing by an average of about 12%, but there’s tremendous variation from one state to another and from one carrier to another.  In addition, there are at least 25 new carriers entering the exchanges across 41 states next year.  

Shop around, even if you're off-exchange

Although there’s less complexity when renewing plans outside the exchange (new plans or grandmothered/grandfathered plans) since they don’t include premium subsidies, it’s just as important to shop around during open enrollment even if you didn’t get your current plan through the exchange.  Premiums are fluctuating significantly for 2016, and you might find that a new plan - either on or off the exchange - will be a better value.  Keep in mind that November 1 to January 31 is your only opportunity to shop around for coverage for the coming year.

Shopping around forces carrier competition

Auto-renewing means you could miss out on a new option that wasn’t available last year, or an option that’s priced more competitively than last year.  It doesn’t take long to log back into your exchange account and scroll through the available options for 2016.  You may end up deciding to keep your existing plan, or you may decide to switch to a new plan.  But either way, you’ll know that you’re actively choosing the option that’s the best fit for you and your budget.  

The exchanges were established to provide us all with a shopping platform that encourages competition among the carriers.  But that only works if we shop around during open enrollment.  

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