Using Marketplace Retroactive Coverage to Facilitate Continuous Enrollment in the Public Health Emergency Unwinding
Joel Ario and Tara Straw, Manatt Health and Jason Levitis, Urban Institute
The federal expansion of health coverage programs during the pandemic lowered the uninsured rate, counteracting the coverage losses that otherwise could have resulted due to economic upheaval. Two federal actions, in particular, have had big impacts on coverage: Medicaid’s continuous coverage requirement, which prohibits disenrolling individuals from Medicaid during the public health emergency (PHE) as a condition of enhanced Medicaid federal funding, and enhancements to the federal premium tax credit that have led to the highest enrollment ever in Affordable Care Act Marketplaces. By stabilizing coverage for the lowest-income people, these two coverage initiatives have reduced churn between and out of programs and have likely improved equity.
These gains will be tested when an estimated 15 million people lose Medicaid coverage as the PHE ends and the continuous coverage requirement phases out. Many losing coverage will be eligible for other sources of subsidized coverage, including a majority of children who will be eligible for the Children’s Health Insurance Program and roughly 3 million people who will be eligible for Marketplace subsidies. The sheer logistics of transitioning this many people from one form of coverage to another makes it certain that some people will experience a gap in coverage. Even a small gap could mean ailing health or spiraling medical debt, especially for low-income people.
Gaps for people who lose Medicaid but are eligible for subsidized coverage in the Marketplaces could occur for several reasons. Some people might be unaware for several months that they have lost Medicaid because they never received notice (for example, if they moved and did not update their address); they may only become aware that they are uninsured when they try to use their Medicaid coverage (and, in fact, in some cases, these people might still be eligible for Medicaid). Others will have a gap in coverage because they learn after their Medicaid coverage is terminated about their Marketplace eligibility and the existence of financial help. And even those who are aware of the Marketplace could have a gap in coverage because they find Marketplace coverage unaffordable, or they fail to take action in advance of their Medicaid termination. This latter circumstance can happen because Marketplace coverage generally begins no earlier than the first of the month following the Marketplace eligibility determination and plan selection, and sometimes even a month later. So if someone’s Medicaid termination is effective on the last day of the month, and they apply for Marketplace coverage the following day, they will have at least a one-month gap in coverage. This problem is compounded by the fact that Medicaid termination notices may be sent as little as 10 days prior to termination, providing little time to act. All of these factors will be especially acute at the end of the PHE, when a huge volume of people will need to transition to new coverage programs or become uninsured.
Providing a retroactive coverage option in the Marketplace is one innovative strategy for eliminating coverage gaps between Medicaid and Marketplace coverage for people eligible to make that transition at the end of the PHE. Pennsylvania’s state-based Marketplace, Pennie, is considering an optional retroactive coverage policy. This expert perspective describes the retroactive coverage policy innovation and its benefits, and offers strategies for states to consider in their implementation that will maximize coverage continuity, minimize adverse selection, and address potential operational challenges.
Pennsylvania’s Proposal to Allow Retroactive Coverage
Minimizing these types of coverage gaps will require extraordinary coordination between Medicaid and the Marketplace and new, innovative policies. In one example, Pennie has decided to extend the Special Enrollment Period (SEP) for loss of minimum essential coverage (MEC) from 60 to 120 days, to allow people more opportunity to enroll in a plan. Another policy under consideration by Pennie is to give people losing Medicaid the option to enroll in Qualified Health Plan (QHP) coverage that is retroactive to the first day of the month after their Medicaid coverage terminated, provided they pay any back premiums owed, in order to eliminate any coverage gap between Medicaid and Marketplace coverage.
Pennie’s Retroactive Coverage Concept
To promote continuity of coverage, Pennie’s Board of Directors is considering a policy that would give enrollees two options for their coverage effective date: the first of the month following plan selection (the current rule) or a new option to have coverage start the first of the month following coverage loss. The policy would become effective the month in which the PHE ends and terminate on the last day of Pennsylvania’s six-month unwinding period. Intended to smooth out coverage transitions, this policy would promote equity by ensuring that low-income families maintain seamless coverage. Enrollees choosing an earlier coverage effective date would owe premiums (net of any premium tax credit) for their retroactive coverage months. Enrollees would also retain the option to choose prospective coverage only.
While uncommon, this type of retroactive coverage option occurs in private coverage in certain circumstances. For example, people who win certain eligibility appeals in the Marketplace can elect retroactive coverage to the date of the incorrect determination, or can opt for prospective coverage. Also, under the Consolidated Omnibus Budget Reconciliation Act (COBRA), a person losing employer-based coverage can eliminate their coverage gap by paying premiums back to the date their group insurance policy was terminated; in fact, payment of any back premiums is a prerequisite for COBRA eligibility. Mandating retroactive coverage is not legally possible for people losing Medicaid and entering the non-group market since guaranteed issue rules prevent eligibility for prospective coverage from being conditioned on other factors, including paying prior months’ premiums. In addition to this legal obstacle, there is a practical reason for not requiring prior-month premiums: people losing Medicaid are likely to have low incomes and find coverage unaffordable if they need to first clear the hurdle of paying premiums for retroactive coverage.
The Benefits of Maximizing Retroactive Coverage
Permitting the option for retroactive coverage will help consumers avoid unintentional gaps in coverage. This is important for consumers who may receive a Medicaid termination notice late in the month, leaving only days to act. It is also important for consumers whose notices are delayed and who did not intend to go without coverage. Avoiding gaps is especially crucial for consumers receiving ongoing care, or who have acute or chronic health conditions. Maintaining continuous care may avoid serious health events requiring high-cost interventions later.
One concern expressed by some stakeholders is that people who opt for retroactive coverage will have disproportionately incurred large claims during the potential gap. The fact that some low-income people could have used health services during that limited gap period is a key reason to consider this policy.
- For consumers, the burden of past-due claims might be too heavy and lead to not enrolling at all. Nearly one-quarter of adults report that a $400 emergency expense would make them unable to pay monthly household bills, but this figure is significantly higher for people with low incomes (less than $50,000) and for people of color. More than half of lower-income Black or Latino(a) people say they would not be able to pay monthly bills if faced with a $400 emergency expense. And without insurance, a person could face long-term health consequences. For example, people who are uninsured—who are disproportionately people who have low incomes or are people of color—are significantly less likely to get preventive care or services for chronic illness or major health conditions. People without coverage can quickly accumulate medical debt. Medical debt is more likely to be held by people who are uninsured, Black, or who are in poor health—a circumstance that would be exacerbated if the number of uninsured people increases at the end of the PHE. Having medical debt can discourage people from getting future care for treatment of chronic and serious illnesses, stretching the discriminatory effects far into the future.
- For providers, retroactive coverage could make providers whole after non-payment for past services and spread the risk for the cases where the provider burden would be the largest and the least fair to exclude from the insurance system.
- For insurers, time- and circumstance-limited retroactive coverage could create the long-term benefit of increasing enrollment, especially among people who are eligible for the highest subsidies. In addition, to the extent this option helps people avoid an unintentional gap in coverage, such as when they receive a Medicaid termination notice late in the month, retroactive coverage could allow coverage continuity without affecting the risk pool. It would also mitigate risk of consumers needing high-cost treatments later due to an interruption in care.
- From a broader societal perspective, the ending of the PHE presents a unique challenge that demands an innovative, targeted response from all stakeholders—including Marketplaces and their QHP issuers—to protect people’s health and prevent more people from becoming uninsured and incurring medical debt.
Balancing Costs and Benefits in an Optional Retroactive Coverage System
States considering a retroactive coverage policy have several options available to maximize coverage while minimizing adverse selection and addressing potential operational challenges, including policies that:
- Confine the SEP to people affected by the PHE unwinding: Marketplaces have broad flexibility under Exceptional Circumstances SEP authority to restrict enrollment to specific groups of people. For example, the “Federal Emergency Management Agency (FEMA) SEP” under this authority created special flexibility during COVID-19 for people who lived in a state with a FEMA disaster declaration (currently all states) and failed to enroll in coverage due to the virus, versus allowing anyone in the disaster area to enroll.
- Limit the retroactive period: A few potential limitations could blunt the degree of adverse selection, both of which Pennie is reportedly considering. First, while one option is to permit retroactivity during the full 120-day loss of MEC SEP, another approach would limit retroactivity to the first 60 days of SEP eligibility. This could minimize adverse selection by giving people fewer months to experience pre-coverage medical claims, while still helping to limit coverage gaps. Second, the policy under consideration by Pennie would also be limited to the unwinding period rather than being a permanent fixture, limiting future adverse selection risks.
- Make prospective coverage the default option: Defaulting to prospective coverage, as being discussed in Pennsylvania, would likely lead most people to take that option. This could increase enrollment in a way that stabilizes the risk of the enrolled population as a whole. By contrast, if consumers are presented with the prospective and retrospective options without a default, they would be more likely to choose the retroactive option only if they have back claims.
- Allow retroactivity in the current plan year only: Allowing retroactivity only within the current plan year, as in the federal government’s implementation of the FEMA SEP, creates administrative simplification for plans and Marketplaces while also limiting adverse selection concerns.
- Allow payment of prior-month premiums over time: Paying lump-sum premiums for retroactive coverage might be cost-prohibitive for some people, especially those with low incomes, and discourage enrollment altogether. Allowing payment over a period of months could alleviate this financial burden. Similarly, steps could be taken to temporarily extend or suspend grace periods, so people owing several months of back-premiums do not immediately confront pended claims or an imminent retroactive termination of coverage.
The PHE’s continuous coverage requirement has overwhelmingly benefited populations that are the least likely to be insured—including people of color and low-income populations—so they also stand to have the biggest coverage losses in its unwinding, leading to worse health and more medical debt. New policies targeted to facilitate coverage continuity for people eligible for Marketplace enrollment, such as optional retroactive coverage, are needed to reduce the friction between programs and promote continuous coverage.
 CMS recently affirmed this reading of the statute by prohibiting this practice in Marketplaces for the 2023 plan year.