More Than One In Five Americans “Churn” Through Health Coverage Within A Year

Census2The U.S. Census Bureau has just released the Current Population Report’s Health Insurance Coverage in The United States, 2015. This report sits alongside the Centers for Disease Control and Prevention’s National Health Interview Survey as a critical source of understanding changes in health insurance in recent years.

The report discusses coverage during the three years from 2013 through 2015, so it does not reveal the large increase in employer-based coverage since the great recession. During this shorter period, there was an insignificant gain in employer-based coverage, and a large increase in persons dependent on Medicaid, the joint state-federal welfare program that provides health benefits to low-income residents. The number of people dependent on Medicaid for at least part of the year increased from 55 million in 2013 to 62 million in 2015. (Almost the entire increase took place in 2014, Obamacare’s first year of implementation.)

(As I have noted many times, it is incorrect to categorize Medicaid dependents as “insured” alongside those with private benefits, because the latter are earned. It is like categorizing those receiving cash welfare payments alongside wage-earners as people with “incomes.” Nevertheless, every official source makes this error.)

However, the report also corroborates what I noted in my discussion of the National Health Insurance Survey: Obamacare’s exchanges are subject to significant churn: The number of people with (what the report describes as) “direct-purchase” health plans increased from 36 million in 2013 to 46 million in 2014 and 52 million in 2015. Not all of these are in Obamacare exchange plans, but almost all of the increase is due to Obamacare exchange plans.

However, we know that 16 million people have not migrated to Obamacare exchange plans in two years! On the contrary, only about four million people are in Obamacare exchange plans for an entire year (as reported in the first quarter of 2016). People drop into Obamacare exchange plans but get out as soon as they can.

This has contributed to the significant churn in health coverage. Over one in five Americans has had multiple coverage during 2015. Among those with “direct-purchase” policies this increases to almost 60 percent!

This is not a stable market. Those who believe insurers should invest in so-called “accountable” care that focuses on ensuring beneficiaries stay healthy for the long run will be frustrated as long as U.S. health insurance is so fragmented.

Comments (9)

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  1. Lee Benham says:

    Because of the ACA Health Insurance has become a bad deal for most Americans. Thank you Obama!
    With the average Family premiums running $12,000 a year and 40% + rate increases coming 1/1/2017
    along with Family deductibles going to $14,300. Why buy Health insurance at all.
    If the definition of insurance is to spread risk over a large group of people that cannot be personally financed and the out of pocket would put the family into bankruptcy anyway. Then why buy insurance?
    People need insurance to cover their deductibles now.

    • Ron Greiner says:

      Getting sick is expensive. With cancer the consumer might lose at least 6 months of income which could be $30,000 or more. Add the family deductible and the consumer needs $44,300. If cancer strikes in October the consumer spends another $14,300 in January for another medical deductible for a grand total of $58,600.

      You are correct lee. Consumers need to plan for a critical illness because they need a mountain of money even if they have health insurance.

  2. Devon Herrick says:

    “…only about four million people are in Obamacare exchange plans for an entire year.”

    I believe Aetna reported that the average duration of coverage for someone enrolling during open enrollment was between eight to nine months. Someone enrolling during a special enrollment period was about half that amount. Oddly enough, special period enrollees cost about 20% more than regular enrollees.

    • Barry Carol says:

      That’s because when they know they need care like a hip replacement, they sign up for insurance if they can. After they get their procedure and recover, they drop the policy. Harvard Pilgrim Healthcare experienced this phenomenon under Romneycare. Then CEO, Charlie Baker (now MA’s governor) said the medical loss ratio on that business was 600%!! This is what a death spiral looks like.

  3. Bob Hertz says:

    I do not disagree with the statistics or the problem, but I would like to check in with some additional explanations (based on real life experience in my agency).

    1. On the lower income end of the exchanges, like 150% of poverty, people often drop their health insurance because they have a car repair or layoff and their budgets are just that tight….even with subsidies.

    2. The special enrollment people do drop off, but often they move to another carrier. In other words, a special enrollment person who comes on in September may very well leave their current company and go elsewhere at year end.

    • Barry Carol says:

      But Bob, at the end of the day, the special enrollment people have significantly higher medical claims than those who signed up during the regular open enrollment period which suggests that there is at least some gaming of the system going on — waiting for a known healthcare need to acquire insurance coverage assuming they can qualify under at least one of the special enrollment period criteria.

  4. Bob Hertz says:

    As for the special enrollment problem, here is what I think is going on.

    Picture two individuals who have just been laid off by their employer in August.

    One is a picture of health, the other has chronic illnesses.

    Both have had a deep decline in their income.

    The picture of health might say, I will just go without health insurance until the open enrollment period, or maybe I will buy a short term health plan for unexpected catastrophes.

    The chronic illness person might sign up for COBRA, or will buy a qualified plan if the qualified plan is cheaper.

    This is straightforward anti-selection. I would not call it “gaming,” though for the insurance company my little distinction may not matter.

  5. Bob Hertz says:

    Also, Barry, the persons in a special enrollment cannot wait until they have a health need before applying.

    They MUST apply for an ACA plan within 60 days of losing group coverage, in order to get a guaranteed issue qualified plan.

    They cannot just wait until they are told by their doctor that they need surgery.