Why are there open enrollment and special enrollment periods for health insurance? In a faraway land, a long time ago, before the numerous lawsuits to overturn the evil socialist Obamacare Affordable Care Act, you could apply for health insurance at any time of the year. The catch was that you could be denied for a pre-existing condition.
Many people are familiar with buying car and home insurance any time of the year. They find it odd that they cannot enroll in a health plan when they need coverage. The Affordable Care Act did away with the pre-existing medical condition clause, but the insurance companies requested that an open enrollment and special enrollment periods be instituted like group health plans.
If you are outside of the open enrollment period, and you don’t have a qualifying life event for a special enrollment period, you can’t buy health insurance. Why? Adverse selection. There are people who, after suffering from an accident, want health insurance to cover the costs of their health care. Unfortunately, many of these people will drop the health insurance after their services are covered by the insurance plan.
Adverse selection is wanting to enroll in health insurance under adverse conditions. The health plans, and society in general, wants everyone in the insurance pool from the beginning. When people climb out of the pool – drop coverage after getting treatment – the big health care bills must be covered by the remaining people in the pool. That raises the rates for everyone in the pool, and that’s not fair.
With the advent of Obamacare, the individual and family health insurance plans are now like employer group plans that have an open enrollment period. If you want to enroll in a group plan outside of open enrollment, you will need a qualifying life event for a special enrollment period such as being newly hired or the loss of other creditable coverage.
Qualifying Events for a Special Enrollment Period
- Loss of health insurance: divorce, job change, turned 26 years old
- Moved to California
- Married/Domestic Partnership
- Birth and adoption
- Release from incarceration or military
- Domestic Abuse or Spousal Abandonment
- Gained Citizenship
- Started driving for app-based service like Uber or Lyft
- Special Circumstances Declared by Covered California: natural disasters, Covid, American Rescue Plan
- Loss or Decrease Income: maybe eligible for Medi-Cal that is open year-round.
Before the evil Obamacare, you could apply for health insurance, but the insurance company may not offer to sell it to you. Even Kaiser Permanente routinely denied people for health insurance before Obamacare. You may not have been offered a health plan because of that unexplained rash in 1995. Or the insurance company would offer you a health plan, but exclude any pre-existing conditions such as heart problems.
Obamacare did away with pre-existing condition and waiver of specific coverage clauses. One of the big questions that triggered automatic denial of health insurance was if a doctor had recommended surgery in the last couple of months. This question goes to the crux of the adverse selection issue: people only enrolling in health insurance to get something fixed, have the insurance company pick up the bulk of the costs, then drop the coverage.
Subject to a few exceptions, if you don’t have health insurance, you are outside of the Open Enrollment Period, and you don’t have a qualifying life event for a Special Enrollment Period, you can’t get health insurance. Covered California may offer special enrollment periods that the carriers don’t honor. For example, Covered California will allow people to enroll under the qualifying life event of just learning about the American Rescue Plan through December. The health insurance companies will only allow enrollment into off-exchange plans outside of open enrollment under the established special enrollment conditions.