ObamaCare apologists continue to insist that things are going swimmingly. However, they are also finding pretty creative ways to fix the problems that continue to plague the enterprise. As this blog has long noted, a major problem is that health insurers offering ObamaCare policies appear to be enrolling significantly sicker beneficiaries than they had anticipated. This is why ObamaCare has a “bailout” so that they don’t lose too much money. This state of affairs is especially painful to insurers because they have designed their ObamaCare policies to attract the healthy and repel the sick — which has not worked. Nor did the insurers succeed in imposing a rule preventing hospitals from enrolling patients in ObamaCare policies. Anecdotes suggest that hospitals invested serious effort in enrolling the sickest uninsured patients in the new policies.
The Wall Street Journal has reported data confirming the adverse selection:
Among those health-law marketplace enrollees who have seen a doctor or other health-care provider in the first quarter of this year, around 27% have significant health issues such as diabetes, psychiatric conditions, asthma, heart problems or cancer, the data show. That is sharply higher than the rate of 16% for last year’s individual-consumer market over the same time frame, according to the data, which was supplied by Inovalon Inc., a health-technology firm that receives medical claims directly from nearly 200 insurers that are its clients.
It is also more than double the rate among people who held on to their existing individual policies; among those enrollees, the rate was 12%. Those consumers, who kept so-called grandfathered individual plans, are showing by far the lowest rates of use for health-care services such as emergency-room visits, hospital stays and prescriptions.
This is a problem for insurers, but it’s not a problem for the Administration. That’s why the U.S. Department of Health & Human Services has just announced that an estimated 95 percent of current ObamaCare enrollees will be automatically re-enrolled in their plans during the next open enrollment, which starts in November. However, new research Avalere Health estimates that ObamaCare enrollees who chose the lowest cost Silver plan will likely have to switch plans if they want to keep premiums down in 2015, because a different insurer will become low-price leader.
So, if you are one of the few healthy people who signed up for ObamaCare, or your health improves, you will have to expend some effort to find a plan that keeps your premiums down. You may decide it’s too much hassle and drop out, risking being fined for disobeying the individual mandate. However, if you are in poor health and costing the insurer lots of money, you just sit tight and the system automatically re-enrolls you. I conclude that the Administration’s new rule has made adverse selection in the exchanges worse.
What else can be done? The prize for most creative solution goes to Katherine Swartz and John A. Graves, who propose moving the open enrollment from November-February up to February-April. This is because people suffer “ego depletion” and “choice overload” when choosing ObamaCare policies, which is amplified if the open enrollment starts around Thanksgiving:
…[L]ate fall is one of the most financially and emotionally stressful times of the year, particularly for people with limited incomes. The holiday season between Thanksgiving and New Year’s — with pressures for buying presents, travel, and the onset of winter home-heating bills — strains many family budgets. These are not months when lower-income households have extra money for paying premiums for health insurance plans that begin the following January. Indeed, research on people’s reactions to scarcity of time and money suggests that the holiday season may be the worst time of the year to require complex health insurance enrollment decisions.
February through April, on the other hand, is when low-income households are receiving their tax refunds and Earned Income Tax Credits (EITC). So, if open enrollment shifted to this period, more would sign up. It is not clear whether the authors endorse the Administration simply not paying out households’ tax refunds or EITC, and transferring those monies directly to insurers. Might this cause more healthy low-income households to sign up for ObamaCare? Maybe, but I would not hold my breath waiting for the Administration to make that change. There is a reason why complex political decisions (like voting in general elections) are as far away in the year as possible from tax season: At tax time, the government does not want citizens to remember the pain it causes them.
“…estimated 95 percent of current ObamaCare enrollees will be automatically re-enrolled in their plans during the next open enrollment.”
And if they have the lowest silver plan and it will not stay the lowest, how can they justify automatically re-enrolling individuals without giving them a choice for higher premiums?
“However, if you are in poor health and costing the insurer lots of money, you just sit tight and the system automatically re-enrolls you.”
The whole system is the opposite of cost-effective. I wonder how insurers are dealing with the re-enrollment of their costly individuals. The risk corridors can only do so much.
“February through April, on the other hand, is when low-income households are receiving their tax refunds and Earned Income Tax Credits (EITC).”
This is an interesting concept. People and families are probably slightly better off financially due to tax refunds and the end of the holidays. More people would sign up, and probably pay their premiums too.
As this blog has long noted, a major problem is that health insurers offering ObamaCare policies appear to be enrolling significantly sicker beneficiaries than they had anticipated.
How can that be? I’m not even an insurer and I anticipated that the first people in line to sign up would be those unable to buy affordable coverage prior to the ACA. These high-cost enrollees now get two subsidies: 1) a cross subsidy from young enrollees who must overpay for coverage; 2) a sliding-scale subsidy based on income. By contrast, younger people don’t have health concerns, yet they are required to pay more than their expected costs.
Under those conditions, why wouldn’t you anticipate the average age of enrollees will be a decade older than under the old (risk-rated) system?
Who exactly did they expect to enroll? Healthy people have little use for health insurance. the sick who are uninsured would be the first people to sign up. If insurers couldn’t come to this conclusion, then they should get out of the health insurance business.
So did I Devon, and anyone else who thought about this even a little bit. We must remember that wealth redistribution and government power are the cornerstones of this administration’s objectives, and therefore, the incentives in the ACA that have led to this situation are entirely predictable.
“ObamaCare apologists continue to insist that things are going swimmingly.”
Better get out the life preservers.
Therein lies the rub with Obamacare- it does nothing to reduce cost and does everything to adversely select the poor and unhealthy to become members.
Indeed, Obamacare has become quite the conundrum for the handsome young Indonesian actor, Barry Sotero, who plays the president of the United States on TV.
“Obamacare- it does nothing to reduce cost and does everything to adversely select the poor and unhealthy to become members.”
I think this is a pretty accurate definition of ObamaCare.
But nothing to reduce cost? That’s called a risk corridor!
I find these arguments hollow as the book of business Anthem has in the CA exchange (for example) is supported by the book of business outside the exchange which is larger. With the risk corridors and community rating I don’t see how they will lose any money.
I will tell you one thing though. I am seeing negative rate increase on group plans this year.
The risk corridors, et cetera, suggest that they will not lose money. It also explains (artially) why many states will see carriers enter the exchange market. However, that does not mean ObamaCare is a good thing. It just means taxpayers are bearing more risk than admitted by the government.
Are you an agent? If you are seeing reduced premiums, that is pretty unique.
Yes I am, I just received a small group renewal that was (-)8.35% and that is not the first one. I have received several.
It all depends on the RAF they had. If it was 1.10 then premiums go down, if it was at the premium rate .90, premiums increase.
I don’t mix politics with my pocket book so I am open to what Obamacare brings.
Moving the enrollment to coincide with tax day is not inventive – it is a tautology.
You want inventive – drop me a note. I will show you how to collapse this thing and leave its decaying dead carcass as a warning to every legislator that voted for it without reading it.
PS – the methods I am supporting have years of success in the international and regional global markets – ie a case precedence of stability, profit, and performance.
Or you could keep just moving goal posts and calling it innovative.
It is easier to destroy than to create. That is the simple man’s way out.
It is easier to go with what works, and is proven, than to lie about what doesn’t.
I have intentions to kill this bill – and replace it with that which is individual, owned, and portable; not mandated by the government – not bloated in dead plan lethargy; and it works – I am overseas now – it works here.
will it work in America ? – Not with the current Administration, President, or mind-set ; but then again – what is working under them ?
All individual Health Plans are portable and individually owned. There are also several levels of benefits one can buy.
Obviously if you cannot get sanctioned in the US your product is substandard.
You need a new sales pitch without the anger…
John, you are completely correct that taxpayers will ultimately pay more to help the sicker part of the individual market get affordable health insurance.
To which I raise the following questions:
a. Is this really a ton of money by federal standards?
Say that 3 million of the first 5 million enrollees in the ACA (not Medicaid) are sicker than average.
Say that the average subsidy to them is $3000 a year.
That is $9 billion. Of course the amount will grow, as all federal programs have grown.
But for now, we spend $9 billion on Medicare every four days roughly.
b. The Republican alternatives to the ACA have usually included high risk pools, and letting the insurers go back to real underwriting.
But would high risk pools cost a nickel less than $9 billion a year and were in all states and were fully funded?
I doubt it.
If we have no employer mandates, and we won’t, then some number in the millions will fall through the crack and run up health claims. Federal funding is not the worst way to handle this.
I’ve never been a fan of high-risk pools.