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Beyond BLS

Beyond BLS briefly summarizes articles, reports, working papers, and other works published outside BLS on broad topics of interest to MLR readers.

January 2023

Autoenrollment’s effect on health insurance coverage

Summary written by: Jonas Trostle

When it comes to acquiring health insurance, a small hassle can make a big difference. In “Reducing ordeals through automatic enrollment: evidence from a health insurance exchange” (National Bureau of Economic Research, Working Paper 30781, December 2022), Mark Shepard and Myles Wagner seek to quantify how much autoenrollment into a health insurance plan changes the number of people who are uninsured. The two authors find that autoenrollment of eligible residents increased new enrollment by 48 percent and steady-state enrollment by 32 percent.

Shepard and Wagner use “de-identified” data collected between fiscal years 2007 and 2014 from the Commonwealth Care health insurance exchange in Massachusetts. Using a difference-in-difference design that took advantage of a change in autoenrollment policy for only a part of the population in 2010, they calculate that autoenrollment changed not only the number of new enrollees but also the demographic characteristics of the new enrollees. Broken down into two groups, new enrollees who enrolled on their own versus new enrollees who were autoenrolled, those who were autoenrolled were generally younger, healthier, and spent less on healthcare.

The authors explain that sometimes adding “ordeals” (also called “hassles” or “friction”) can improve the selection of customers into certain services. This concept, named ordeal targeting, however, does not work well in health insurance markets. In those markets, the people who are most likely to be excluded by the ordeals are those who are less likely to seek healthcare. The authors find that “when subjected to a small hassle, about one-third of qualified individuals simply fail to take up health insurance.” This exodus of the young and healthy, caused by not autoenrolling eligible residents after 2010, leads to 15 percent higher costs for those who have health insurance.

Overall, given the level of new enrollment, Shepard and Wagner find that autoenrollment was quite competitive with increased subsidies. Compared with the cost of subsidization, the cost of autoenrolling a new enrollee was 36 percent to 40 percent lower. The authors say that, in practice, autoenrollment can complement more common methods of increasing enrollment. With an estimated 40 percent to 50 percent of the uninsured in the United States currently eligible for fully subsidized coverage, the U.S. uninsured rate could be reduced by half with autoenrollment.