Here at Insureasy.net, we get quite a few questions about health insurance. We don’t mind answering any and all questions because this is something that everyone should have a working understanding of and we are happy to be a part of this education! But if there is a question that arises more than once, we think it might be easiest to write about it in a forum that is more widely available. If one person has asked, then it is probably on 1,000 more people’s minds.
One of the more frequent questions we get is “Hey Insureasy, what is the deal with Open Enrollment? What is it and why can’t I just sign up for insurance at any old time throughout the year?” Great question!
For starters, Open Enrollment is the period of time in which an individual can sign up for an individual health insurance policy without a qualifying event. In 2014-2015 Open Enrollment will run from November 15, 2014 – February 15, 2015. Any policy that is purchased before December 15th will have a January 1st effective date.
So we know that we have Open Enrollment but now the question is why? The easiest way to explain this is Adverse Selection. Adverse Selection is the phenomenon when people who are at higher risk for incurring claims will be more likely to buy coverage. This leads to all sorts of conundrums when paying for the claims. People have a tendency to buy more coverage when they sense danger is imminent and as a result won’t pay as much into the insurance pool before they start to collect their benefits. This becomes even more of an issue if insurance is not required, because all of the healthy, low risk people will avoid purchasing coverage and thus will not contribute premiums to the pot of money available to pay claims.
This set of events can rapidly deplete an insurance company’s pool of money that they have set aside for claims and catastrophes. To prevent this from happening, before the Affordable Care Act was in effect, most insurance companies could exclude coverage on people with pre existing conditions. Now this act is illegal under the ACA regulations and companies are not allowed to deny coverage for pre existing conditions.
This leaves insurance companies vulnerable to Adverse Selection. Lawmakers set up an open enrollment period to make sure that everyone is paying premiums for the majority of the year. Everyone is now required to have health insurance- this increases the amount of premium that is in the pool- making it easier for insurance companies to offer affordable coverage for everyone.
It will take several years for the full effects of the Affordable Care Act to be realized. Insurance carriers must stay on top of trends in order to ensure they will be able to pay all of the claims in the future. Keep an eye out for any new developments that maybe forth coming, as we will be sure to update you with new information as it becomes available!
We are here to help so feel free to check out our helpful resources and tools as you learn more about purchasing health insurance!