HHS was aiming for … 39 percent, notes Philip Klein. As you know, the fewer “young healthies” there are on the exchanges to subsidize expensive treatments for sick people with their premium dollars, the less sustainable those exchanges become. HHS has two and a half months left to hit its target, but as Klein notes, if you assume five million total enrollments by March 31st, fully half at this point would need to come from young adults to hit the 39 percent threshold.
Which is to say, your premiums are probably going up next year. But you knew that.
People signing up for health insurance through the Affordable Care Act’s federal and state marketplaces tend to be older and potentially less healthy, officials said Monday, a demographic mix that could cause premiums to rise in the future if the pattern persists…
“We’re pleased to see such a strong response and heavy demand,” said Kathleen Sebelius, the secretary of health and human services. “Among young adults, the momentum was particularly strong.”
Officials for the first time released basic demographic information about the people signing up for insurance. Of those who signed up in the first three months, 55 percent are age 45 to 64, officials said. Only 24 percent of those choosing a health insurance plan are 18 to 34, a group that is usually healthier and needs fewer costly medical services. People 55 to 64 – just below the age at which people qualify for Medicare — represented the largest group, at 33 percent.
No surprise, really. Humana, an insurance giant, warned last week that it “expects the risk mix of members enrolling through the health insurance exchanges to be more adverse than previously expected.” If their numbers are tilting old and sick, everyone else’s must be too. Two obvious caveats, though. One: There’s every reason to expect a crush of enrollments from young adults before the March 31st deadline. Most sick people will have already signed up by then and there’ll be renewed media coverage about the mandate penalty in the weeks approaching deadline. As word trickles out through the mostly ignorant target population, some chunk of young adults will respond by signing up at the last minute. The demographic mix will get better. So much better as to hit 39 percent, though? Two: According to experts, missing HHS’s target of 39 percent enrollment by “young healthiest” wouldn’t be a total disaster. According to Kaiser, a 25 percent enrollment rate would drive costs up for insurers by 2.5 percent but would still give them a narrow profit margin. (Another expert thinks costs would increase 3.5 percent under that scenario, which means insurers really need something closer to 30 percent enrollment by young adults.) That’s bad news for you and me, since we know who’ll be on the hook for those costs, but nothing so dangerous to the industry that it would jeopardize its stability.
Bob Laszewski, meanwhile, takes a long-term approach to this problem. The important number isn’t enrollment as of March 31st, he says, it’s enrollment as of, say, 2016. That’s when the “risk corridor” (i.e. bailout) provisions of O-Care sunset and that’s when we’ll really know if the law’s sustainable without federal largesse.
I think we’re going to ultimately need about 20 million people for a sustainable pool. It doesn’t need to be this year. That’s what the transitional risk corridors are all about. But it needs to happen in the first few years. So when I hear people talk about the goal being seven million, I think, “time out.” This needs to be 20 million people within three years.
The problem with the enrollments today is that they’re so small, it’s less than 10 percent of the uninsured coming in, it really can’t be anything but sick people. So if it’s going to be sustainable you need loads of people coming in the door. So when I judge where Obamacare is on December 31st or March 31st, I want to have confidence that this thing is ramping up to 20 million. I want to see momentum.
They’ve signed up a little more than 500,000 young adults so far. If Laszewski’s right about a pool of 20 million uninsured to make this thing float, that means the feds need more than seven million more “young healthies” over the next three years. He thinks the individual mandate has been so weakened that it’s destined for waiver or repeal, but I don’t know: The more desperate the White House gets for young adults to sign up, the more it’s going to want that mandate bludgeon to keep the pressure on them to sign up. (The mandate penalty becomes considerably more expensive starting next year, remember.) There’s no political class in America that can be taken for granted as easily as young voters. Why do them a favor by lifting the mandate?
Another good question:
HHS still hasn't released # for those who paid. Is it possible those who haven't paid yet are younger, meaning 24% is inflated?
— Philip Klein (@philipaklein) January 13, 2014
As of Thursday, Laszewski was hearing from industry sources that only 50 percent of new enrollees have paid so far. It’s true that some insurers have pushed their payment deadlines back to the end of the month to give people more time, but not all have — and if we’re still at 50 percent a third of the way through, how many can we reasonably expect will make good on their first month’s premium by the end of the month, realistically? Maybe 85 percent? 90? If the latter, we’re talking about more than 200,000 people nationally who’ll have missed the payment deadline, which means insurers will then have to decide whether to extend the payment deadline into February(!) or start canceling coverage for new customers they’d much rather keep. And all of that is on top of sorting through glitchy applicant data from Healthcare.gov, which Laszewski estimates still represents roughly five percent of total online applications. January’s going to be a long month.