Insurers Report Consumers Gaming The Individual Mandate In Massachusetts

The Boston Globe reports that “[t]housands of consumers are gaming Massachusetts’ 2006 health insurance law by buying insurance when they need to cover pricey medical care, such as fertility treatments and knee surgery, and then swiftly dropping coverage“:

In 2009 alone, 936 people signed up for coverage with Blue Cross and Blue Shield of Massachusetts for three months or less and ran up claims of more than $1,000 per month while in the plan. Their medical spending while insured was more than four times the average for consumers who buy coverage on their own and retain it in a normal fashion, according to data the state’s largest private insurer provided the Globe.

The typical monthly premium for these short-term members was $400, but their average claims exceeded $2,200 per month. The previous year, the company’s data show it had even more high-spending, short-term members. Over those two years, the figures suggest the price tag ran into the millions.

This is precisely what keeps insurers up at night — the fear that an inadequate individual health insurance mandate would allow some people to game the system and purchase coverage only when they need it. This creates a death spiral by which healthy people jump in and out of coverage, leaving insurance pools populated with costly sick people. Austin Frakt argues that Massachusetts can fix this problem by establishing an open enrollment period and allowing insurers to exclude coverage for preexisting conditions for six months, something Massachusetts Governor Deval Patrick has already proposed.

Critics will undoubtedly argue that the Massachusetts experience could doom the success of the national mandate. And while there is some question about whether or not the penalties for not buying coverage are high enough to detract free riders, I suspect the success of the mandate will also heavily depend on the public education campaign promoting coverage and the simplicity of the actual enrollment process.

Fortunately, Families USA’s Ron Pollack is all over it. Along with America’s Health Insurance Plans (AHIP), and several other industry partners, Pollack is heading up a 50-state health care reform implementation effort called Enroll America to encourage everyone to sign up for coverage. The campaign will pay particular attention to the 5% of Americans who are eligible for coverage but are not expected to enroll and “will work to create an easy application process for benefits, including access to enrollment at doctors’ offices, pharmacies and government agencies that provide other benefits like food stamps.”

All this is a good start to enticing individuals who don’t think they need coverage to sign up for insurance. Still, lawmakers will undoubtedly have to make their share of changes to the health law (just like Patrick is doing now) to ensure that coverage is both affordable and accessible.