One Quarter of Obamacare Enrollees Dropped Out in 2015

people-in-waiting-roomThe administration recently announced 12.7 million people selected or were automatically enrolled in an Obamacare exchange plan at the end of the third open season – February 1. Except for special cases, anyone who missed that deadline cannot enroll in an Obamacare plan for 2016.

That is a few more people than the 11.7 million than at the end of 2015’s open enrollment. However, the administration also announced that only 8.8 million people remained enrolled in Obamacare on December 31, 2015. That is a drop of almost one quarter from the end of 2015 open enrollment.

One explanation for some volatility is that eligibility for discounted premiums via tax credits paid to insurers in Obamacare exchanges depends on income. If an enrollee’s income drops, he may fall in to dependency on Medicaid. If his income rises, especial through getting a job with health benefits, he will drop Obamacare coverage in favor of employer=based coverage.

However, that churn should be fairly constant throughout the year. It cannot explain the dramatic changes in Obamacare enrollment. Another explanation is that people are duped into enrolling into Obamacare by messages telling them how inexpensive it is, then drop it when they see they cannot afford it.

Fair enough, but we are in the third year of enrolment. It is hard to believe people just keep coming back for more punishment. The remaining explanation is consistent with the evidence that Obamacare beneficiaries are sicker than the insurers or the administration expected. It is that some people let their ailments build up throughout the year, wait until open enrollment, sign up for coverage, get medical care, and then drop coverage.

That is not a well-functioning insurance market.

Comments (33)

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  1. Devon Herrick says:

    That figure is pretty close to the predictions made early in the process. I’ve talked to insurance agents who said the figure for individual health insurance is similar, if not a little higher. Of course, exchange coverage is heavily subsidized. About 82% of those enrollees are getting subsidy credits. What many are basically saying is that the coverage is not worth even the subsidized price. The average duration of coverage in the exchange is less than one year — it’s about 8 to 9 months.

    • John Fembup says:

      Not enough public information yet, to know what’s really behind this. My guess is the majority of dropouts are those who did not receive a subsidy – or received only a nominal subsidy.

      In other words, most of the dropouts may have signed up not for low cost, but for some other reason. What could that be? Abolition of pre-existing condition restrictions, for one; or maybe fear, or relief, or just enthusiasm. But then they encountered buyers remorse when they asked themselves: why sign up and pay premiums; it’s more expensive than I thought and the coverage ain’t all that great. I’ll drop out now, save my premiums, because I can sign up again later anytime I want, if I need coverage.

      These people may believe their primary personal risk is accidental injury. Many people tend to underrate their risk of accidents. Especially younger people.

      • Jackie D Smith says:

        You’re partly correct on people deciding against the cost. Many had serious medical conditions that needed attention. They bought coverage, probably subsidized, had the procedures done, and then dropped the policy because they “no longer needed it.” But you’re incorrect saying they can buy it again later, anytime they wanted. They are only eligible to buy coverage during the 60 day open enrollment at the end of the year. If someone doesn’t have coverage and has a serious medical situation in July, they are just out of luck till January.

        • Quite right, Jackie, there is calendar risk if he drops out. However, I wonder if that cannot be gamed too. For example, by getting engaged but not married until you need to for health reasons. I remember reading when Obamacare came in, there were a few articles about strategic divorce, too!

      • That is highly unlikely. Over 80 percent of those in exchanges get discounted premiums through tax credits. Most who pay full freight for individual coverage do not go through exchanges.

  2. The big ham says:

    They are dropping ACA compliant Plans and buying STM (short term medical).
    It’s all health people need at a fraction of the price. Numbers from insurance companies for STM sales is running about $50,000,000 a week in new premiums. Agents and consumers are slowly figuring out that the world of health insurance changed 1/1/2014.
    Now the goal is to get from open enrolment to the next open enrolment as inexpensively as possible.

    • John Fembup says:

      Big Ham, good point. Also need to keep in mind that STM policies do not satisfy the minimum coverage requirements built into Obamacare.

      And so it seems to me the next variable for individuals to figure out is the difference between (a) their Obamacare premium net of their subsidy, and (b) the sum of their STM premium plus their Obamacare tax penalty. Will that difference continue to favor STM? Will STM policies remain financially attractive for basically healthy people?

      A lot of moving parts involved in that decision. Which reminds me . . .

      . . . 10 days ago, Obama complained that it’s “easier to order a pizza than vote.” [As it should be, in my opinion].

      I wonder if Obama realizes yet that it’s also easier to order a pizza than select an insurance option under Obamacare?

      • The big ham says:

        Agents and consumers are slowly figuring out that 80% of the population that does not get subsidies are exempt from the ACA penalty because of the 8.05% affordability test. Health people have options

        • Ron Greiner says:

          As Obamacare premiums increase fewer and fewer people will be subject to the penalty because of the 8.05% affordability test.

          • Jackie D Smith says:

            The affordability test applies to the portion of premium the employee pays in a group insurance plan. The amount is 9.5% of household income. If the employee’s portion is that amount or higher they are not exempt from the penalty, but they are eligible to enroll in an individual plan and qualify for subsidies through the market place. If their portion of the premium is less than the 9.5%, their cost is subsidized by the employer, and considered “affordable” and as such they may not leave the employer plan and get a subsidized plan in the market place.

            • Ron Greiner says:

              Jackie, we are talking about the fine that people have to pay for not having insurance and not about employees that you have confused this thread with.

              Just reread the thread and you can see that your confusion about employees’ affordability is not what we are talking about.

              • Jackie D Smith says:

                You referred to the 8.05% affordability test. As an insurance agent, I haven’t read all 3,000 pages + the 20,000 pages of regulations, but I’m not familiar with an 8.05% test. The only affordability test I know about refers to an employee’s portion of the benefit cost. Where does the 8.05% come from?

                • Ron Greiner says:

                  Jackie, if an employer is charging employees $1,200 a month for family coverage and you go to the exchange and the family cost is $1,000 for the cheapest plan and this family only earns $50,000 a year – are you telling them that they will owe a penalty if they don’t buy insurance?

                  • Jackie D Smith says:

                    Ron, the affordability test applies only to the cost for the employee, not the family portion. So, what portion of that $1,200 applies only to the employee? If he makes $50K a year, and the cost share for him is less than $395/month, that is considered affordable. He can waive the employer coverage and buy a plan through an agent or the marketplace if he wants, but he is not eligible for subsidy.

                    If the employee’s portion of the cost is more than the 9.5% of family income, the plan is considered unaffordable, and he may acquire individual coverage through the private market, and possibly qualify for subsidy. If that happens, the employer is fined $3,000 for that employee for providing a plan that is not considered affordable.

                    If the other family members choose not to enroll, the tax penalty will apply. But they may enroll in an individual plan and qualify for subsidy, if they are not covered through their employer under a plan that is considered affordable.

                    • Ron Greiner says:

                      Jackie, you say, “If the other family members choose not to enroll, the tax penalty will apply.”

                      Sorry Jackie but you are wrong and have been giving your clients false information.

                      I bet it is easier to sell uninformed people if you say, “Hey, you have to buy my insurance or the IRS will be all over you with heavy fines – Sign Here.”

                    • Ron Greiner says:

                      Jackie, –If incomes are too low to afford insurance available in a particular area of the country, people are relieved of the responsibility through an exemption. People don’t have to devote more than 8.5 percent of their income to insurance.

                      Last year, 300,000 taxpayers paid penalties for not having health insurance but should not have been penalized — often because their income was low enough to qualify for an exclusion


                  • Jackie D Smith says:

                    Ron, I’ve been in the insurance business 30+ years, and would never stoop to the tactics you describe. I don’t have to. As a former educator, I’d say my clients are far better informed than you and most of the public who relies on misinformation from the media and the administration.

                    But I still abide by what the law states, if you don’t enroll and aren’t qualified via the long list of exemptions, you must pay the tax penalty.

                    • Jackie D Smith says:

                      Ron, you’re correct in that situation. And those low income people may qualify for Medicaid.

                    • Ron Greiner says:

                      Jackie, if the insurance is not affordable that is an exemption, geez.

                      I don’t care if you have been selling insurance for 30 years, you were wrong and I can only assume that you have been been telling your clients information that wasn’t true. I hope you have E & O insurance because you need it.

                      It doesn’t make any difference if you knew you were wrong when you lied or were just uninformed, you were still wrong when you give your false information.

                    • Jackie D Smith says:

                      Ron, it’s a shame you’re so angry about things you know so little about. Your questioning my ethics when you don’t know me or anything about me is really beyond the pale. For the record, I’m well informed and educated on the issues. I hold certifications of RHU, LUTCF and Self Funding Specialist. Each fall I take over 100 hours of certification courses and exams just to remain current with the regulation changes and to be qualified to write the pittance of individual business that I usually loose money for writing, because I always act in what’s best for the client’s need first.

                      My business specialty is employee benefit planning for companies with less than 50 employees. Yes, I carry E&O, and in 30+ years never even had a threat of legal action. Your uninformed accusations are undeserving of further conversation.

                    • Ron Greiner says:

                      Jackie, so you have been selling employer-based health insurance for 30 years that terminates sick employees when they become too sick to work the required Eligibility Requirement of 30 hours per week. And I’m suppose to be impressed with you?

                      YOU are the reason we had to pass Obamacare because of the sick employees that lost their employer-based health insurance. What a sweet heart you are!!

                      Isn’t it amazing that you were giving prospects the wrong information about the penalty and you are so smart and have a license?” lol

                    • Jackie D Smith says:

                      Ron, you’re obviously a democrat shill whose source of information are the democrat talking points. I’ll bet you’re a card carrying union member, so that you can wallow in inefficiency and incompetence without fear of loosing your job. You’ve read one article on the ACA and assume you’re an expert.

                      To educate you a little further, with hundreds of employer clients representing thousands of employees, I’ve never known an employer to terminate an employee because of health conditions. And for your information, if that were the case, the ACA didn’t do anything to eliminate that. If an employer wants to do that, he can still do it.

                      Ron, go educate yourself, get off the union/government tit and think for yourself.

                    • Ron Greiner says:

                      Jackie, you’re a hoot. YOU are at the NCPA blog and the NCPA came up with the idea of the tax free HSA, the centerpiece of Republican health care reform. Also, you are talking with the agent who wrote the 1st tax free HSA in the USA and you are calling me a Democrat.

                      See why I say you’re a hoot Jackie?

      • PJohnson says:

        Not necessarily true. I’ve had an STM (or series of) for more than 2 years. $150 is a lot less than $500 I’d have to pay to get pediatric and ob/gyn coverage (I’m a widowed empty nester – thank YOU Mr. Obama [& Reid & Pelosi]). One STM provider sent me a 1095-B form citing I was in compliance. However for the other 6 month period the other carrier did not. Go figure.

        Further as to the 25% drop. I’m betting on “duped” as the reason for dropping out.

        • The big ham says:

          Ron ,
          Stop picking on poor Jackie she just dosent know what she dosent know.
          It’s sad that an agent with 30 years is confused. What’s that say about the consumer.

          Here is the 8.05 % affordability exemption I mentioned Jackie. Read up we all need help.

          • Ron Greiner says:

            The big ham, did you read what Jackie said? Jackie said, “…with hundreds of employer clients representing thousands of employees, I’ve never known an employer to terminate an employee because of health conditions.”

            That is a lie. If Jackie has thousands of employees insured she knows that when an employee can’t work 30 hours per week, the Eligibility Requirement, the employer-based insurance company will shove these poor sick cancer women on a Short-Term COBRA for insurance termination. It’s the law.

            If a poor young female employee were to ask Jackie, “If I get cancer and can’t work, will I lose this employer-based insurance?” I can only assume Jackie would say, “OH NO – I have been selling this stuff for 30 years and with hundreds of employer clients representing thousands of employees, I’ve never known an employer to terminate an employee because of health conditions.”

            In reality with Jackie’s license she is required to give the consumer Full and Proper Disclosure. Jackie should be telling these employees what will happen to their health insurance if they don’t work 30 hours per week regardless if they ask or not. Anything short of Full and Proper Disclosure is a serious Ethics Violation. Jackie is taking Ethics classes to keep her license but she just doesn’t care. I shudder to think of all of the lives that have been destroyed over the last 30 years because of Jackie’s Ethics Violations and lies.

            The big ham, you ask, “It’s sad that an agent with 30 years is confused. What’s that say about the consumer?”

            The fraud is everywhere. Even smarter agents that know the consumer is not subject to the IRS penalty are telling consumers that they have to buy or the IRS will get them, exactly like uninformed Jackie. Plus, the consumers’ CPAs are telling them they have to pay when they don’t.

          • I understand the 9.5 percent threshold (or, perhaps 9.56 percent under subsequent IRS guidance) is to determine whether the employer offering is affordable. If not, the employee is eligible for tax credits in exchange.

            (One interesting thing I read in the benefits blogs is that it is quite difficult for an employer to determine employees’ household incomes. So: How do employers know which of their employees has crossed the threshold?)

            The 8.05 percent threshold has nothing to do with employer offering specifically, but only with employee’s ability to pay premium whether he benefits from exchange tax credit or not.

            It looks to me like there could be odd outcomes, depending on the difference between the worker’s share of employer-based premium and the net (discounted after tax credit) premium for lowest-cost coverage in exchange.

            For example, if your share of employer-based premium is 10 percent of household income, you are eligible for exchange tax credit.

            However, if the net premium in exchange is 9 percent, you can avoid it and not pay penalty. You stay uninsured.

            Unnecessarily complicated, to say the least.

            • Ron Greiner says:

              Are you sure John?

              What about the family Glitch that Hillary is so worried about that the media refuses to cover?

              • The big ham says:

                John ,

                Reading the way you have it written I would disagree. I would assume I am just misunderstanding what you meant.
                If family members have access to employer provided insurance that is affordable for the employee only. The rest of the family is disqualified from tax credits regardless of the cost. The reason so many dependents are uninsured is because they can not afforded the premiums and do not qualify for subsadies. They are exempt from the individual mandate because of the 8.05% and can purchase anything they want.

                • Ron Greiner says:

                  The media and the non-profit think tanks won’t discuss this huge flaw in Obamacare. The media just keeps saying that low income people qualify for tax credits, which isn’t true.

                  Hillary, of all people, is the only one who will discuss this Family Glitch problem.

                  The propaganda in America is as bad as NAZI Germany in 1938.

                • I may well be wrong. My major point is that if a sensible person were imposing a threshold, it would be the same threshold and not these two thresholds.

  3. Tianli says:

    Not enough public information yet, to know what’s really behind this. My guess is the majority of dropouts are those who did not receive a subsidy – or received only a nominal subsidy. consumabile medicale