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  • Writer's pictureAhsan Malyk

Can Health Insurance Be Retroactive?

The time period from the planned effective date until the employee can sign up for health insurance is 30 days.

If an employee enrolls in insurance after their effective date, but before day 29, their coverage will go back to that date. Therefore, the first day of coverage has already passed.

The employee's coverage is retroactive to their initial 3/1 effective date, for instance, if their effective date is 3/1 and the provider doesn't complete their application until 3/15.

"Retroactive" Enrollment: What Is It?

When we think about enrolling in public health insurance schemes, we usually picture people giving information, getting their eligibility determined, and then signing up for (and, if necessary, paying for) coverage that will cover the future health services they will receive. Since there is no other method to get the essential information and no way to collect premiums without the individual's involvement, this typically requires the enrollee's active, prospective involvement.

A retroactive strategy is distinct. An insurance policy that will pay claims for any medical services received by those who are otherwise uninsured can be deemed coverage for those people. Their eligibility can then be evaluated and retroactively accounted for later, and any necessary premiums can be paid.

Using this strategy, people benefit from health insurance throughout the time they would have been uninsured, giving them access to the healthcare system and financial security in the event of a major sickness. And such advantages may be granted without the person performing any future action.

The Illustration Of The Retroactive Coverage Period Under Medicaid

Although it may initially seem strange, a retroactive approach to enrollment is a part of today's health policy environment, particularly in Medicaid. The Medicaid program typically pays for medical expenses incurred in the three months prior to the time a person first applied for

Medicaid coverage when they are newly enrolled in the program. This means that if a Medicaid-eligible person seeks medical attention from a healthcare provider, the provider may give care while attempting to enroll the person in Medicaid coverage and may later be reimbursed for those services during the time of retroactive coverage.

This is a crucial element of Medicaid and represents a large part of program spending. One estimate from before the ACA states that the retroactive coverage period accounts for around 5% of Medicaid spending.

The Centers for Medicare and Medicaid Services found in 2016 that one state's data study revealed that 14% of enrollees had claimed during the retroactive coverage period, with claims per individual averaging $1,561. Retroactive coverage is often handled outside the managed care system in states and qualifying groups where Medicaid benefits are offered by managed care organisations, with the state paying claims on a fee-for-service basis.

As a result, even while not enrolled, those who qualify for Medicaid with retroactive coverage have a sizable amount of insurance protection. They can typically receive care if they are sick, and they are mostly protected from financial liability in the event of a significant medical incident.

Certainly, enrolling proactively has many advantages for the individual, such as easier access to primary care and less stress about prospective medical expenses. Enrollment also makes care management and coordination supports more accessible, which may result in improved quality and cheaper costs.

However, even without an insurance card, the Medicaid-eligible "uninsured" nonetheless have a sizable quantity of insurance due to the retroactive coverage term.

Giving Individual Market Customers Retroactive Enrollment

The similar idea might be used to the niche market, albeit with significant adjustments. Adverse selection is the biggest problem, as people may almost always wait until they are sick before "signing up" for coverage when enrollment is done retroactively. Medicaid does not have a problem with this because people only owe minimal premiums, which are not a significant source of programme funding.

But in order for retroactive enrollment to be successful in the individual market, we need a plan to guarantee that people pay for coverage even when they are well. In other words, if retroactive enrollment guarantees that people have insurance coverage even if they haven't enrolled, it should guarantee that people are paying for that benefit.

One strategy, as previously said, would be to develop a "backstop plan" that would offer protection to those who lack insurance. No action would be necessary because the backstop would be deemed to cover everyone who lacks insurance and is not Medicaid-eligible.

People would pay an income-adjusted price when filing their taxes each year for the months they were covered by the backstop, which would be equal to the premium they would have paid to get affordable insurance if they had proactively enrolled in the individual market. Notably, this strategy would work best if financial assistance for individual market coverage were made more generous than it is at the moment, making the premiums for the backstop plan and for affirmative enrollment less expensive than they are currently.

This backstop plan premium would be paid whether or not the person used the backstop to get any medical care. The backstop plan would take part in risk rebalancing and be regarded as a component of the individual market risk pool.

When those insured by the backstop require medical attention, the backstop will operate similarly to any other insurance plan, paying claims and offering utilisation control and care coordination. With the exception of high-value therapies and preventative care, all treatments would be subject to a deductible that may be adjusted for income. Cost sharing would be structured as a catastrophic plan design.

The backstop would need a method to set a payment amount for services received from every provider when a backstop-covered individual seeks care since it would cover people who have not made any affirmative decisions regarding their health coverage. This would entail mandating that healthcare providers accept a particular out-of-network fee, at the very least for urgent care or for the complete range of medical benefits.

The backstop plan might be used with a new public plan in the individual market and would operate similarly to a public option.

Another option would be to restrict the backstop to covering claims for a brief time, say 30 days, after which the person would need to consciously choose (or be assigned to) a "regular" individual market plan.

The Backstop Plan-like features are among other public benefits.

According to some, retroactive enrollment under a backstop plan would just be the individual mandate of the ACA rebranded, sharing its political toxicity. This strategy would be used through the tax system as a mechanism to support the sustainability of a community-rated risk pool. It shares certain parallels with the ACA's mandate.

However, there are more appropriate comparisons than the individual mandate outside of the contentious healthcare politics. The backup plan resembles policies like unemployment insurance and the workers' compensation system in a number of crucial ways. In some circumstances, the covered population is charged a "premium" for the coverage because policymakers have decided that workers should have a particular insurance benefit.

Notably, both programs automatically contribute to workers' coverage (through employer-side payroll taxes for unemployment insurance and premiums paid by employers for workers' compensation) and require formal enrollment from workers when they need to access benefits. This is similar to how the backstop plan would collect premiums through tax filing and enroll people when they need medical services.

These instances and retroactive backup health insurance plan enrollment are undoubtedly different. The backstop plan would only cover the small group of otherwise uninsured people, as health insurance is a much more expensive benefit and lacks the relatively broad base of workers' compensation and unemployment insurance.

Retroactive health insurance enrollment proposed here would also include direct individual-level competition between the backstop option and private plans, which is not a characteristic of the other advantages. However, the existence of unemployment insurance and workers' compensation makes it evident that this strategy is politically possible, just as the example of Medicaid's retroactive coverage period illustrates that our current healthcare system could support the backstop plan approach.

In fact, retroactive enrollment into backstop coverage may be able to divert a lot of the political energies driving the discussion of health reform's next steps. The backstop plan suggests a route to really universal coverage that wouldn't directly interfere with current coverage options, which is maybe the most significant.

The uninsured population is constantly shifting due to the patchwork of coverage sources we currently have: According to a review of data from 2012, 5% of those without insurance had coverage just one month previous, and 20% had coverage five months prior. No system can handle this level of churn and achieve universality if it depends on a distinct action to "start" enrolment.

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