It may sound funny to say it, but health insurance companies don’t derive their profit from unfortunate events or mishaps. Insurance companies depend on people living peaceful lives, dutifully paying their monthly premiums without incident. That’s the only way insurance companies can actually fulfill their role when an incident happens to one of their payees.
Open enrollment is a means of preserving the delicate balance of healthcare selection. It’s a mechanism that allows insurance companies to control the influx of newly enrolled buyers. It also lets insurers educate them about the benefits of coverage, and attract more than just high-risk consumers during enrollment.
This article will introduce the concept of open enrollment, describe its benefits, and delve into the history of the practice. Read on to find out more.
What Is Open Enrollment?
Healthcare open enrollment is an annual window of opportunity for individuals to enroll in designated health plans. They’ll have the option of either signing up for an all-new plan, renewing or changing an existing one, or reassessing the strength of their current coverage. Healthcare needs change frequently as people get older, so it’s necessary to have regular periods of adjustment like this.
In other words, open enrollment is when:
- Individuals can enroll in a new insurance plan for themselves or a loved one.
- Companies provide educational materials to potential buyers in the healthcare marketplace.
- Employers review company plans and make whatever changes they need to make.
These changes only occur at specified windows, set by insurance companies for preferred times of the year. This means that anyone desiring to purchase health insurance can’t do it at just any time of the year. Unlike auto or home insurance, purchasers of health insurance must wait for an open enrollment period to find coverage.
The length of these enrollment periods can also vary dramatically. For most policies sold on the marketplace, open enrollment lasts from November 1 to January 15 each year. This window is long enough to allow buyers to make an educated choice but not so short that they feel utterly overwhelmed by their options.
But this isn’t the only open enrollment period to know about. They’re also special and short-term enrollment periods, which can allow for greater flexibility.
Special Enrollment Periods
These are enrollment durations conducted beyond the general open enrollment period run annually. Special enrollment periods are framed around qualifying life events, which make someone eligible to apply for insurance outside the standard period. Some qualifying life events include:
- Losing your previous health insurance coverage.
- Losing coverage from your parents’ healthcare plan at age 26.
- Changing your marital status, whether from marriage or divorce.
- Having a child.
- Enrollment address changes to a different ZIP code.
Special enrollment periods are important events that allow people to secure coverage outside the standard duration. Lasting around 60 days, special enrollment allows individuals undergoing a significant life transition to find a lifeline to better health coverage. They’re a way for people to adapt to fresh changes by protecting themselves accordingly.
Short-Term Health Insurance
All is not lost for someone who misses the open enrollment period and doesn’t qualify for special enrollment. They can still apply for short-term health insurance coverage, which allows them to buy a policy to cover themselves temporarily — up to around 36 months in most places. These could be a suitable option for those who:
- Are in a reasonably fit state of health and don’t expect major illnesses.
- Cannot afford to go without healthcare coverage until the next open enrollment period.
- Can’t qualify for government assistance programs like Medicare or Medicaid.
- Desire some form of health insurance without committing to a long-term plan.
- Are specifically looking for a short-term health insurance plan while they explore other options.
But it must be emphasized that these are temporary solutions. Short-term policies can accommodate individuals in certain situations, but they’re not meant to act as regular health insurance one year after the next. They can’t cover pre-existing conditions, for example, and there are many limitations to the benefits provided.
Since these plans rarely cover essential needs like maternity care or even mental health issues, someone with a short-term policy could find themselves radically underinsured when they need it most. This also renders them vulnerable to financial instability if a serious health crisis — beyond the boundaries of the policy — ever arises.
How Did Health Insurance Open Enrollment Begin?
The modern history of health insurance itself dates back to the 1850s. Back then, railroad and steamboat workers worked in crude and often dangerous environments filled with the potential for serious injury. Although these jobs paid well, workers were always at risk of suffering some serious harm that would permanently disrupt their ability to support themselves. But who could pay for their care when the worst happened?
Enter health insurance. The Franklin Assurance Company of Massachusetts began offering workers accident insurance in 1850, creating a business model many would imitate in the years ahead. Suddenly, workers could protect themselves from serious injury financially by paying into a “pool” of accident insurance coverage. The healthy workers paid for the injured workers, and every healthy worker knew the others would pay their bills if they needed it.
The concept of open enrollment itself is a consequence of the national healthcare system formed by President Harry S. Truman in 1949. Companies during World War 2 had begun offering health insurance to their employees to compete in the crowded job market; the practice made its way to the highest levels. People began enrolling in droves, to the point that the initiative’s financial viability became a serious cause for concern: Wouldn’t unhealthy people have the most incentive to join and “crash” the system?
That’s why insurance companies began limiting enrollment periods to a certain time of year. It gave them the power to:
- Set their own risk management strategies by reducing the number of applicants at any given time.
- Better understand how many applicants will enter their insurance pool — and in what condition — to handle their own cost basis.
- Streamline the entire healthcare selection process by limiting application reviews or policy updates to certain times of the year.
- Monitor their coverage levels to determine the economic viability of current policy offerings.
Open enrollment periods also allowed insurance companies to boost their relationships with other insurance providers. They can now take the time to reinforce existing insurance contracts, acquire new partnerships, and enhance the coordination of healthcare initiatives across the board.
And, most importantly, this allowed for a sense of collective responsibility to grow in the health insurance industry. Companies could now pool their resources together, share industry best practices or insights, and come to grips with the ever-evolving changes in the insurance landscape.
The Benefits of Open Enrollment for Businesses
The regularity of open healthcare enrollment is one of its chief benefits for companies. Businesses know when and where enrollment begins. This makes it easy for HR teams to forecast their benefits offerings with great precision. They can change their existing packages as needed to align with current or future projections for the entire labor force.
For instance, companies with an older workforce will naturally have many employees closer to retirement age. Those employees have different insurance requirements than those just starting out in their careers. Since the company knows the open enrollment period in advance, it can adjust its benefits package to provide a level of coverage customized to its own workforce.
Businesses can also use open enrollment periods to:
- Secure their competitive advantage in the industry by offering a higher standard of coverage than their rivals.
- Grant employees the ability to modify their own insurance policies according to their circumstances.
- Increase employee retention through the provision of personalized health insurance policies.
- Provide employees access to a larger pool of healthcare providers and find more convenient care options.
- Make it easier to secure top talent during recruitment drives by advertising their healthcare offerings.
Open enrollment, likewise, lets companies augment their communication and transparency for the entire organization. HR teams can clearly share changes to current insurance plans, recommend alternatives, or otherwise educate employees about their options and the importance of choosing the right one. Since this only happens once a year, companies can simplify the amount of administrative attention paid to health insurance plans.
Resourcing Edge: Aiding in the Open Enrollment Process
Open enrollment is a necessary aspect of the health insurance industry. Without the ability to narrow the insurance applicant pool, no one would get the coverage they need. People living with serious illnesses would flood companies with urgent healthcare applications, and it would force these companies to shut down rather than deal with the costs they cannot bear.
Offering healthcare coverage is a massive responsibility for companies to take on. It can provide employees with an unmatched level of security and confidence, but only when the coverage suits employee needs. Ensuring that it happens is a primary responsibility that a partner like Resourcing Edge takes on.
Resourcing Edge is proud to offer diverse human capital management solutions to companies across the business spectrum. With many years of experience in overseeing open enrollment periods, Resourcing Edge can help companies develop benefits packages that satisfy the needs of their employees. To get a head start on 2023’s open enrollment period, reach out to Resourcing Edge today.
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