Administration Releases New ACA Enrollment Figures With Age Breakdown

HHS: 2.2 Million Registered In ACA Exchanges, Young Adult Enrollment Up Eight-Fold. The Department of Health and Human Services (HHS) released new ACA enrollment statistics, reporting that "[t]o date, nearly 2.2 million (2,153,421) persons have selected a Marketplace plan during the first three months of the initial open enrollment period." The report added that of the 2.2 million enrollees, "[p]ersons between the ages of 18 and 34 account for nearly a quarter (24 percent) of all Marketplace plan selections."  It also highlighted a “a nearly five-fold increase” in health insurance enrollment on the ACA exchanges from November 2013 and an “eight-fold increase in the cumulative number of young adults” registered during the same period." From HHS:

[Department of Health and Human Services, 1/13/14]

Fox Uses Young Adult Enrollment Statistics To Stoke Fears Of Health Care Program Collapse

Fox & Friends Hosts: ACA Has Too Few Young Adult Enrollees “To Balance The Books.” On the January 14 edition of Fox News' Fox and Friends, co-hosts Steve Doocy, Elisabeth Hasselbeck and Brian Kilmeade claimed that ACA's young adult enrollment numbers are insufficient “to balance the books”:

KILMEADE: And now today some stats come out about the Affordable Care Act. And it turns out to the surprise of almost nobody, the young people are not signing up and in order to balance the books and to make the Affordable Care Act affordable, healthy people have to enroll. These numbers don't lie. Look at this.

HASSELBECK: And we have -- this actually shows that the young people are much more wise when it comes to shopping than maybe anybody else. Only 25 percent of the enrollees right now are between 18 and 34.

DOOCY: That's short of the goal.

HASSELBECK: 25 percent. Way short of the goal. 55 percent of early enrollees are between 45 and 64.

DOOCY: That's way over the goal!

[...]

HASSELBECK: Well they're short of the goal. It's also lopsided though, right because they are relying on the young and healthies to offset the cost of those who will just by nature of their deteriorating health cost the system more and that's a grave concern. [Fox News, Fox & Friends, 1/14/14]

Young Adult Enrollment Numbers Likely To Increase Through March

Wash. Post's Wonkblog: “Young People Sign Up Later - Typically Right Before The Penalty Hits.” In response to the January enrollment report from HHS, The Washington Post's Ezra Klein emphasized the fact that the current enrollees are “not the final risk pool” because, based on previous experience with health care enrollment, “Younger people sign up later - typically right before the penalty hits”:

1. Let's begin with what we know: The Department of Health and Human Services reports that 24 percent of the people purchasing health insurance through Obamacare's insurance marketplaces are between ages 18 and 34. That's below the 38 percent that most people -- including the Obama administration -- estimate the law needs  if it's to keep premiums as low as everyone hopes.

2. But -- and this can't be emphasized enough -- this is not the final risk pool. No one anywhere expected that the risk pool would be balanced by Jan. 1. Major health laws always follow the same pattern: The people who badly need insurance sign up first, and they tend to be older and sicker. Younger people sign up later -- typically right before the penalty hits. So far, the age pattern in Obamacare enrollment is tracking the age pattern in enrollment for the Massachusetts reforms quite closely:

The new numbers see Obamacare through December, which is the law's third month of open enrollment and its first month of open enrollment with a working Web site. So you can decide whether February, March or April offer the right comparison to Massachusetts. Whichever month you choose, Obamacare's enrollment pattern looks a whole lot more like Massachusetts than I would've thought given the disastrous launch and the challenging political environment.

3. The big question is what enrollment looks like on April 1 -- after the open enrollment period ends. The “important thing to watch,” writes the Kaiser Family Foundation's Larry Levitt, “is [whether] enrollment among young adults trending upward? So far yes, based on graphs here." It's safe to say there will be many more young adults in the pool in April then there are now. But no one knows how many more.

[...]

7. “The health mix of ACA enrollment is much more important than the age mix,” writes Levitt.  So far, we're using age as a stand-in for health. But if all the young people signing up are sick, then the models break down. And if the older people signing up are healthier than people expect, then the models break down in the other direction. Indeed, the most valuable enrollee, from the insurer's perspective, isn't a healthy 21-year-old. It's a healthy 55-year-old. They pay more into the system than the healthy young person but they don't take much more out. Or, as Levitt puts it, “Will we get the 60 year old gym rats?” [The Washington Post, Wonkblog, 11/14/13]

The Atlantic: Massachusetts' Health Care Reform Enrollment Started Slow, Accelerated Over Time. According to The Atlantic, Massachusetts' health care reform law, which the ACA is modeled after, had slow initial enrollment, but saw enrollment levels spike as the penalty deadline approached:

“To my friends in the media, I have one message: please take a chill pill. You won't see 7 million enrollees for a while, and that's not failure, that's real world,” John McDonough, a professor at the Harvard School of Public Health who was deeply involved in the passage and implementation of Massachusetts' 2006 health reform law, wrote of the new Obamacare program in mid-October. In Massachusetts, getting people signed up “was a slow crawl, not a sprint.”

Data from the first full year of enrollment in the Commonwealth Care plans in Massachusetts shows that the number of people who purchased premium plans was minuscule at first, with a rate of increase of only 123 people in February 2007.

That surged to 3,645 in April and then remained fairly steady all year, before spiking to 7,783 in the month before the penalty deadline for remaining uninsured kicked in.

[The Atlantic, 10/24/13]

Politico: ACA Supporters Predict Young People Will Enroll Closer To Deadline. A November 7, 2013 Politico article noted that the law's supporters predict that, based on previous experience with health care reform efforts, young Americans are likely to delay enrolling in health care plans until closer to the penalty deadline:

But backers of Obamacare -- and some experts on online consumer behavior -- say it's too soon to panic. Lots could change between now and March 31. Young people are likely to treat enrollment like a term paper -- they'll do it, but at the last minute. After all, according to one online insurance broker, that's what a fair number of their grandparents shopping online for Medicare plans do: wait until they're smack up against the deadline.

And e-brokers point out that shopping for insurance isn't like buying a book on Amazon or a plane ticket on Kayak. Sam Gibbs, president of eHealth Government Systems, said people take their time to understand insurance options and may visit a site repeatedly. It can be a “several weeks or up to a month process,” he said. “This is not a one and done type process.”

When Massachusetts did its own health reform, people typically had 18 interactions -- website visits, phone calls or email -- before they signed up. The big surge came in the last two months before the state's individual mandate kicked in. [Politico, 11/7/13]

ACA Stabilization Mechanisms Make 25 Percent Youth Enrollee Rate Sufficient To Maintain Market

Kaiser Study: 25 Percent Young Adult Enrollees Sufficient To Allow Insurer Profits. A December 17 Kaiser Permanente study found that “the financial consequences of lower enrollment among young adults are not as great as conventional wisdom might suggest.” Kaiser's study showed the effect of having 25 percent of young adults in the overall market would “still be expected to earn profits” and that the effect on premiums “would be well below the level that would trigger a 'death spiral'”:

It is roughly comparable to what Covered California reported for October and November (the first two months of open enrollment), with 21% of all enrollees who picked a plan in the 18-34 age range. However, this is likely a worst-case scenario, since the expectation is that older and sicker individuals are more likely to buy first and that younger and healthier people will tend to wait until towards the end of the open enrollment period (which concludes March 31, 2014). In fact, our recent survey of people in California who are uninsured found that 58% of young adults said they planned to get coverage in 2014. But, if this more extreme assumption of low enrollment among young adults holds, overall costs in individual market plans would be about 2.4% higher than premium revenues.

Insurers typically set their premiums to achieve a 3-4% profit margin, so a shortfall due to skewed enrollment by age could reduce the profit margin of insurers substantially in 2014. But, even in the worst case, insurers would still be expected to earn profits, and would then likely raise premiums in 2015 to make up the shortfall, However, a one to two percent premium increase would be well below the level that would trigger a “death spiral,” which would occur if insurers needed to increase premiums substantially, in turn further discouraging young and healthy people from enrolling. [Kaiser Family Foundation, 12/17/13]

CBS: Mechanisms Built Into ACA Work To Maintain Stable Costs.  In a December 27 CBS News article, Stephanie Condon explained that the CBO projection of 7 million enrollees is not critical for the Affordable Care Act's success, and concluded that a death spiral is unlikely to happen due to mechanisms built into the law to prevent problems with cost:

The concern has been that if only older, sicker people join Obamacare, the costs of covering that market would leader to higher premiums. That would, in turn, prompt even more healthy people to leave the market, leading to the dreaded “death spiral.” The death spiral is unlikely to happen in large part because of mechanisms built into the Affordable Care Act to prevent that. In fact, even if far fewer young, healthy people sign up than expected, the impact on the Obamacare markets would be relatively minimal, some argue. [CBS News, 12/27/13]

Wash. Post's Wonkblog: Stabilization Mechanisms Will Prevent ACA From “Facing A 'Death Spiral.'” The Washington Post's Ezra Klein and Evan Soltas outlined “interlocking fail-safes” in the ACA that are designed to stabilize costs if enrollee pool has disproportionately high health care needs, including provisions like risk corridors, reinsurance and the individual mandate:

3. Risk corridors. Among the least well-known fail-safes in Obamacare are the subsidies to insurers who underprice their insurance. The way this works is that if insurers' actual costs are more than 3 percent above their “target” costs, the government gives them 50 percent of the difference. If they're more than 8 percent above their target costs, the government pays 80 percent of the difference. (The program goes in reverse, too: If an insurer overprices their insurance, they have to pay part of the excess to the government.)

The program exists only for the first three years of the law. But it basically gives insurers a huge incentive to price their insurance low. They don't want to go too low because the program ends in 2016 and they'll lose their customers if they need to raise rates by 500 percent. But for an insurer who's just trying to wait out a bad 2014, the risk corridors are a real buffer. As Adrianna McIntyre wrote, they help plans “weather 2014′s uncertainty and probably keep the following year's premiums relatively unchanged as the risk pool normalizes.”

4. Reinsurance. This is the little brother of the risk corridors. For the first three years of Obamacare, the government basically subsidizes particularly expensive enrollees. So if someone buys insurance and their claims break $50,000 in 2014, the federal government picks up part of the cost. The result is that, for the first few years, really sick people cost insurers less than they normally would, and so can be expected to have less of an effect on premiums than would typically be expected.

5. The individual mandate. The reason the Obama administration is so dead-set against delaying the individual mandate is that it's a key fail-safe against a death spiral.

There's a lot of confusion over the actual costs of the individual mandate, so here's a reminder: In 2014, it's $95 or 1 percent of adjusted income (which is income minus the tax filing threshold, which is $10,000 for individuals and $20,000 for families), whichever is greater. In 2015, it's $325, or 2 percent of adjusted income, whichever is greater. In 2016, it's $695 or 2.5 percent of adjusted income, whichever is greater.

The reason I keep italicizing “whichever is greater” is because it's the part that really matters. A lot of people believe the mandate's penalty in year one is $95. It isn't. Almost everyone who faces the mandate makes more than $9,500. So imagine someone making $53,000. For them, the mandate's cost in year one is $430. By year three, it's $1,075. That's a lot of money. [The Washington Post, Wonkblog, 11/7/13]