Latest Obamacare Enrollment Numbers Add Heat To House Vote On Friday
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Earlier
today, Health and Human Services announced the Obamacare enrollment
numbers for the first 32 days of this expanded open enrollment period (pdf here).
Some will likely argue that online “shopping carts” are notoriously weak barometers of purchase intent, but I think these numbers will actually hold up pretty well. Unlike shopping in other general categories (where the shopping experience is often enjoyable, casual and low friction), shopping for health insurance is closer to filing taxes – a tedious (and high friction) chore. That applies even when the online technology has been industrialized and stress tested.
In fact, comparing any health insurance marketplace (public or private) to Amazon.com AMZN +1.88% isn’t remotely reasonable. A more accurate comparison would be to Aetna's AET +1.28% website which I found to be (not surprisingly) very similar to Healthcare.gov. In general, the requirements to shop (even browse) for health insurance has all of the excitement and ambiance of waiting for the dentist. It’s tedious, slow and more reminiscent of a 1040 filing process than almost anything else available online. Pressing the “proceed to checkout” button won’t likely happen for another month.
Enrollment numbers, however, are no longer the big issue they were just last week. The latest crisis, as always, is right back in D.C. where no less than two Bills are being considered to revise the ACA relative to the cancellation of existing plans many were led to believe they could keep. The two page H.R. 3350 (“Keep Your Health Plan Act” here) is on track for a House vote this Friday.
The cancellations have become the latest high-stakes battleground for Obamacare. A large number of these plans (by some estimates almost 4 million –here) were considered “junk,” but many weren’t. Kaiser is said to be cancelling coverage for about 160,000 and other large scale cancellations have been announced. Former President Bill Clinton has even weighed in telling the OZY news service yesterday:
“I personally believe, even if it
takes a change to the law, the president should honor the commitment the
federal government made to those people and let them keep what they’ve
got.” Former President Bill Clinton – OZY, November 12, 2013 (video interview here)
At the heart of this latest skirmish is a relatively small segment
within one of the smallest segments of the entire insurance market – the
individual health insurance pool.For some, the popular narrative is that this is all a complete surprise. More Government lies and deceit. Shocking I tell you, shocking.
For others, the question remains, why are the carriers cancelling plans that had solid coverage – and are they somehow taking advantage of Obamacare to profit from higher priced plans? Like all of Obamacare, the devil is in the details.
Most industry insiders were well aware of the risks and changes in the highly volatile individual market.
“For those in the know about the law,
the numbers about existing plans were there all along, though they
weren’t publicized before. Language in PPACA regulations from July 2010
stated “40 percent to 67 percent of people” in the individual market
normally change plans in a year, and thus would no longer be in
grandfathered plans.” Benefits Pro – October 29, 2013 (here)
Within this market, those who are between 133% and 400% of the
Federal Poverty Level (FPL) will have access to generous subsidies on
the new public exchanges. Those below 133% of the FPL will have access
to Medicaid (assuming their state agreed to expand Medicaid coverage
– and not all did). So this leaves a subset of a subset. Those who were:
* Healthy enough to qualify for narrow benefit plans on the individual market (many were rejected)
* Wealthy enough (400% or above of FPL) that they won’t qualify for a subsidy on the new public exchange
* Somewhat accustomed to the annual churn that carriers often exercise in pricing this highly volatile market for profit
In terms of the cancellations themselves, there were really only two reasons:* Wealthy enough (400% or above of FPL) that they won’t qualify for a subsidy on the new public exchange
* Somewhat accustomed to the annual churn that carriers often exercise in pricing this highly volatile market for profit
1) Plans didn’t meet the new ACA minimum (called Essential Health Benefit here)
2) Many of the existing plans were “medically underwritten” (i.e.: filtered to select healthy people)
In both cases – existing plans were originally packaged and priced
for benefits that were able to generate a profit. That meant the
benefits (even if real – not junk) were still relatively narrow.
Unfortunately, many who applied were simply rejected outright. That’s
the medically underwritten part. The application process was
specifically designed to select healthy, low-risk
subscribers. Combining those two elements (low risk subscribers and
narrow benefits), is about the only way to create a product that can
generate a profit.2) Many of the existing plans were “medically underwritten” (i.e.: filtered to select healthy people)
Lost in the debate I’ve seen is the idea that the number of people affected were large – and that this is a wildly lucrative market for insurance carriers as a group. Neither is true. In fact, insurance carriers in general loathe the individual market which (for them) is very high-risk, messy and always difficult to price. It also represents a very small percentage of their overall business.
According to the Commonwealth Fund, this selection process on the individual market (combined with other larger economic factors like high unemployment) has left 84 million either uninsured or underinsured (April 2013 – here).
Community rating is the polar opposite of “medically underwritten.” With community rating, carriers are now mandated to offer health insurance policies within a given territory at the same price to everyone regardless of their health status. There was simply no way to accommodate this seismic shift (huge filter to no filter) without repricing – independent of the Essential Health Benefits. With the two combined, rate shock was almost guaranteed.
Which is about where we are going into Friday’s House vote. Once again Obamacare is under full assault and once again, a relatively small group of people are lobbying for a “return to normal.” As always, those lost in the debate are the millions with no chips to play, no vote to wield, no lobbying group in D.C. to champion their cause – and, of course, no health insurance.
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