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Why is there an Open Enrollment Period?

Terms to Know:

Open Enrollment Period (OEP)

A window of time during the year when most anyone can sign up for individual and family health insurance.

Special Enrollment Period (SEP)

The period of time outside open enrollment that requires a qualified life event to enroll in an individual and family health insurance plan.

Why can’t I sign up whenever I want? Good question.

The Answer

In order for an insurance company to stay in business they need:

  1. A large and diverse group of individuals (healthy, sick, young and old)

  2. Reliable and current statistics that will help them predict how many people will need medical services

  3. Enough money coming in regularly from premium payments to cover anticipated losses (medical services required by its members)

Without these factors the system couldn’t survive.

If you take away open enrollment and allow people to sign up whenever they want, you would only have a pool of sick individuals who needed care.  A balanced pool of healthy, sick, young and old is absolutely necessary to keep the scale balanced. Not only that, but having individuals regularly paying premiums to cover the medical services of its members.

Healthy members do help pay for the care of the sick members. And at some time or another, we will all need medical services. The insurance company is just betting that not everyone will need care at the same time, or things could go belly up!

Remember when President Obama said we needed enough young healthy Americans to sign up for health insurance when the healthcare system started to change? Well, he understood that the scale had to balance in order for things to work.

The History of the Matter

Not long ago, you could sign up for health insurance whenever you wanted. But insurance companies could deny people if they had pre-existing conditions like diabetes or a heart condition. This sounds mean, but it kept the right balance of healthy and sick people so costs were covered.

On March 23, 2010, the Affordable Care Act was passed, which said insurance companies could no longer reject people for coverage if they had a pre-existing condition. This was great news! But in order for the insurance companies to stay in business, they needed everyone to sign up at the same time so they had the right risk mix of healthy and sick people, with current data to predict future losses, and a regular flow of money coming in for it to go out.