For the estimated 30 million uninsured Americans, navigating insurance enrollment can be confusing, cumbersome, and intimidating. The hassles are so great that some people have avoided enrollment altogether, and that can be costly for everyone. And when the Biden administration lifts the COVID-19 public health emergency, as it plans to in April, another 18 million people could lose Medicaid coverage.
But HKS Associate Professor Mark Shepard says there is good news for the insurance enrollment process. And he has the data to back it up. We spoke with Shepard about his new working paper, “Reducing Ordeals Through Automatic Enrollment: Evidence from a Health Insurance Exchange.”
Q: How did this research come about?
I’ve been working for a number of years on research, studying the Romneycare Massachusetts Health Insurance Exchange, because, believe it or not, it’s still the best source of data for a health insurance exchange for low-income Americans.
I saw this interesting policy change that happened: The state auto-enrolled the poorest individuals in the Massachusetts Exchange who qualified for free coverage to reduce enrollment frictions. Then in 2010, they had to cut auto-enrollment for financial reasons, requiring users to choose a health plan. And it just jumped out immediately, in just the raw statistics, what a big difference this made on the number of people enrolling in insurance plans. That extra step of choosing a plan reduced enrollment in the program by one third, which was a huge impact. It was the equivalent impact that we’ve seen, from other work, of the effect of raising premiums by almost 60%.
The big question guiding my research is, how do we make health insurance markets work? We know a lot from economics about how markets and competition can work well to benefit society. But we also know a lot from economics about how insurance markets— and health insurance markets in particular—fail in big ways.
So, I think the goal of this line of research is to better understand what policy strategies can be put in place to have not just laissez-faire market competition, but regulated market competition that would yield some of the benefits of choice and competition that we know about from economics, while safeguarding against some of the flaws and problems that we know arise in insurance markets.
Q: What did your study reveal about insurance enrollment?
You could imagine designing some social programs where everyone qualifies. There would be some universal programs, say public education. Everyone qualifies for public education for their kids.
But other programs are targeted, and they’re targeted usually at low income people or certain demographic groups who really need it. The problem with that is it puts the onus on the beneficiary to prove that they qualify.
There were two main findings in our study. One was that even a pretty small hassle—a requirement to choose among health plans that I mentioned before—had a big impact on who gets enrolled.
Second, what we saw is that it wasn’t an evenly distributed reduction in enrollment. It was bigger for some groups than others. The biggest reductions in enrollment were among young and healthy people, which makes sense because a hassle is something you have to work to do. And if you’re young and healthy, you might feel like the extra work is not worth it given that you don’t use much health care regularly.
We also saw that there was a bigger reduction in enrollment in health insurance among people who were living in low-income neighborhoods, living in high-minority neighborhoods.
“A big reason why we have so many uninsured people today in America is that it's difficult to be insured. It doesn't have to be this way.”
Mark Shepard
Q: What do you hope your findings lead to?
If you're trying to get more people to have health insurance, the top priority should be: Let’s take a holistic look at the administrative policies we have for enrolling in insurance. How can we make those simpler?
In particular, I want to highlight one area where a lot of frictions tend to come up. This is the issue of insurance “handoffs.” Individuals who need health insurance can usually get it from not just one source, but one of three different health insurance programs in the United States: Medicaid for the poorest citizens, ACA exchanges for middle-income individuals, and then employer-sponsored insurance for those who have that through their job.
The big challenge is: What happens when you move between eligibility for different programs, for instance, because of a change in income or family status? There has to be a handoff in who’s responsible for your coverage. Right now, what’s happening is that no individual or no program is thinking about who’s responsible for making sure the individual keeps coverage during that handoff. Instead, the onus is on the individual to do that.
And it’s not working. It’s leading to a lot of frictions. So, the more that policymakers can focus on smoothing those handoffs—through smart defaults, through simpler enrollment policies—I think that’s the highest-return area that policymakers can focus on to reduce uninsurance in America.
Q: Why is this important now?
We’ve seen an unprecedented increase in Medicaid enrollment during the COVID-19 pandemic. One of the biggest reasons is that Medicaid agencies aren’t imposing as many re-certification requirements on enrollees. Every few months, in normal times, enrollees in the Medicaid program have to re-certify that they’re eligible. They have to complete paperwork. They have to make sure that they submit new pay stubs to show their income. It’s a big hassle.
What we’ve seen is that, as that hassle of recertification has been paused during the COVID public health emergency, Medicaid enrollment has increased dramatically during that time.
Now, when the public health emergency ends, all beneficiaries will have to start re-certifying regularly again. While that makes sense—we want to make sure that Medicaid is limited to people who really need it—it also imposes a big hassle on beneficiaries. The question is, how much do those hassles matter for whether people stay in health insurance? Secondarily, how could government policy be designed in a way that minimizes those frictions and hassles, so that people who need health insurance and qualify for programs are able to make it through the process?
Q: Your answer is auto-enrollment.
Yes. It’s a classic business move, to get people to sign up and make it easy. I think the government is learning that lesson, slowly.
Today in the ACA, there’s not usually auto-enrollment for individuals into health insurance, but there could be to a greater degree. But in order to do that, there needs to be regulatory clarity, from the Medicare agency and the Health and Human Services agencies that supervise these programs at a federal level, on what state exchanges can do and when it’s okay to automatically enroll individuals.The administrative frictions and barriers to making that work are the key challenge, but that’s a policy challenge. I think what our study is showing is that, if the policy challenges can be worked through, there are big returns in terms of the social goal that we want to achieve: getting more people to have health insurance.
The hopeful news is that—just in the last year—Massachusetts, partly through creative work with federal partners, has found a way to reinstate a form of this auto-enrollment, for people who qualify for $0 ACA health insurance plans. The creative solution that they found was that when people were being reevaluated for Medicaid, they were allowed to check a box saying “if I qualify for a free health insurance plan, please auto-enroll me.” They could choose a different plan later if they want, but the default was enrollment.
A big reason why we have so many uninsured people today in America is that it’s difficult to enroll in insurance. It doesn’t have to be this way. Through smart policy changes—like the form of auto-enrollment that we studied that was in place in the early years of the Romneycare Massachusetts Exchange—we can reduce hassles and get more people enrolled. It can have a big impact on people’s lives.