Last week, HHS released the latest enrollment report for the ACA’s Marketplaces. Thus far, about 3.3 million individuals have selected a qualified health plan on the new Marketplaces. Moreover, the federal Marketplace reports a 62 increase in plan selections in January compared to previous three months – with faster growth among younger consumers. Because previously-insured individuals were disproportionately likely to sign up so that they had no break in coverage, a greater proportion of persons who enrolled since January 1st were likely uninsured before they signed up.
When HHS doesn’t compete with Christmas, many more uninsured people enroll! Given the cash flow pinch at the holidays, most lower- and middle-income consumers wait for their tax refund before they take on new financial obligations. So the key to enrollment success among low and middle income Americans is to offer products when those consumers have the cash to purchase what is for sale.
Why is Christmastime the worst time to sign up folks for up for insurance? December is the month during which consumer credit is most extended (or over-extended). Indeed, almost one-half of consumers using payday loans, prepaid debit cards, and direct deposit advances reported that “the holiday season brings so much financial pressure, they would prefer to skip it altogether.” The ACA consumer isn’t looking to buy insurance during the holidays for the same reason they don’t buy new tires or a used car then: They simply don’t have extra cash at that time of year.
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Yet, the situation reverses just 30 to 60 days later. When the IRS begins to distribute $325 billion in annual income tax refunds, consumer spending shifts. Sales of new and used cars and auto financing activity takes off as soon as tax refunds start to roll out. This mirrors data for new home sales, which typically peak as the IRS mails the refund checks. So it’s no wonder that HHS was so successful this month!
So, what should we learn from February’s report? Easy: HHS will succeed only when it avoids the December Grinch and aligns open enrollment with tax refunds. Instead of competing head-to-head with Christmas, HHS should change the open enrollment to the first quarter of 2015 instead of during the Fall as proposed. hey’ve already announced a tentative decision to move the open enrollment period back by a few weeks (to begin after the midterm elections). They are now within spitting distance of opening enrollment at that magic cash flow moment beginning just days later. The enrollment of millions of uninsured Americans in 2015 depends on this decision.
