Open Enrollment in Obamacare’s Second Year: Early Lessons Learned

On November 15, Obamacare’s second enrollment season opened. Applicants who wanted coverage starting on January 1 had to apply by December 15. Now that the New Year is upon us, we can take three early lessons away from the first six weeks of open enrollment:

  1. Obamacare’s enrollment target of 9 million to 10 million for 2015 (reduced from 13 million) is still very optimistic.
  2. Inertia rules: It appears that two-thirds of 2014 enrollees have auto-enrolled in the same plan, although most could have saved on premiums if they had shopped around.
  3. On average, each new 2015 enrollee is receiving a bigger subsidy than the average 2014 enrollee. So, even though there are fewer Obamacare dependents than initially expected, the total cost to taxpayers may not go down.

On November 10, the U.S. Department of Health & Human Services (HHS) predicted 9.1 million enrollees, within an expected range of 9.0 million to 9.9 million. This was a retreat from an estimate of 13 million enrollees made by the Congressional Budget Office.

In light of reported enrollments, this prediction appears very optimistic. About 7.1 million applicants had “selected” (which includes auto-enrollment for 2014 enrollees) a plan on an Obamacare exchange by December 26. This is likely an underestimate, because data from state exchanges were updated only to December 13, by which date 14 states with their own Obamacare exchanges reported over 600,000 enrollees (p. 16). Let’s upgrade that to an even million, making the total enrolled 7.6 million as of December 26. Obamacare would still have to add one-fifth more enrollees to hit its low target.

About 6.4 million enrolled in the first five weeks (November 15 – December 19), an average of almost 1.3 million a week. As the December 15 deadline for January 1 coverage approached, applicants rushed the doors: 3.9 million signed up in the fifth week alone, of which 1 million applied in the last three days up to December 15 (p. 5). Nevertheless, one-fifth of those who were determined eligible for coverage in the 37 states with federally facilitated exchanges did not bother to select a plan (p. 9).

2014 enrollees who took no action were auto-enrolled by December 18. After that, enrollment dropped to a trickle. Fewer than 100,000 applied in the sixth week. Also, people will drop Obamacare exchange coverage as the year progresses, for various reasons. It appears that the demand for Obamacare coverage this year is pretty well sated.

In a previous Health Alert, I noted that 2015 premiums were kept low by new competitors unafraid to sacrifice underwriting profits to grab market share. McKinsey & Company estimates that three-quarters of Obamacare exchange enrollees could reduce their premiums in 2015 if they switched from their 2014 plan. However, customer inertia appears to have prevailed.

Although detailed data is only available for the 37 states which use a federally facilitated exchange, it appears that about two-thirds of 2014 enrollees have drifted into 2015 without changing plans.

Reconciling the 3.4 million who enrolled deliberately by December 15 (p. 9) with the 6.4 million enrolled by any means on December 19 indicates that about 1.9 million were new applicants. Of 4.5 million 2014 beneficiaries, only 1.5 million chose a new Obamacare plan for 2015, and 3 million ― two thirds ― were auto-enrolled in the same plan for 2015.

The new applicants are demanding more taxpayer subsidies than the 2014 cohort: “For the 2015 Open Enrollment period, the proportion who selected a plan with financial assistance is 87 percent to date compared with 80 percent in the early months of the 2014 Open Enrollment period” (p. 7). This is disturbing, because the proportion of applicants receiving subsidies increases as the open season continues. Eighty-six percent of last year’s late enrollees received subsidies, so we should expect the proportion of later 2015 enrollees who receive subsidies to reach towards 100 percent.

How this will affect taxpayers’ liabilities is unclear: The number of people signing up is fewer than expected, but the proportion of them receiving subsidies is higher than expected. We can only hope that the former effect outweighs the latter. Last April, the Congressional Budget Office updated its estimate for exchange subsidies and related spending. Converting those fiscal year estimates to calendar year estimates indicates subsidies of about $25 billion for 2014 and $45 billion for 2015.

The early evidence from 2015 open season indicates that Obamacare remains unpopular and expensive.

Comments (3)

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  1. Devon Herrick says:

    It appears that two-thirds of 2014 enrollees have auto-enrolled in the same plan, although most could have saved on premiums if they had shopped around.

    As tough as it was to navigate the barely-functioning exchange last year, it’s no surprise that many people opted to just keep their coverage from last year. To a large degree, subsidies are at the margin. This means premium increases are largely borne by the government.

  2. James R Chaillet, Jr MD says:

    I work as a Family Physician in an urgent care setting in Ohio. I see 30-50 patients a day and each day there are several fee-for-service patients. (the majority of the patients are on Medicaid but that’s another story)

    I ask each of these(or their patients why they lack health insurance. The reasons are: they’re not eligible for Medicaid and the plans through the exchange or their employers are too expensive; they can’t negotiate the web site despite trying; they refuse to accept Obamacare for philosophical or political reasons.

    • John R. Graham says:

      Thank you. To be clear: When you write “fee-for-service”, do you mean that they pay themselves, directly, without any insurance?