Thursday, November 14, 2013

California's Health Insurance Exchange Enrollment Says a Lot About What Could Have Been and What Still Has To Happen

Covered California, the state-run Obamacare health insurance exchange, announced yesterday that 59,000 people have so far signed up for health insurance.

Given that California amounts to about 10% of the nation's population, this would suggest a smooth running federal exchange might well have enabled the Obama administration to have met its national first month goal of 500,000 sign-ups.

But the California enrollment also points to the real challenge Obamacare faces.
In the first month, 84% of the enrollees did not qualify for a subsidy. It has been widely estimated that about half of all potential enrollees will eventually qualify for a subsidy. As Covered California's chief executive said, "Those are individuals who have been waiting a lifetime for health coverage."

Covered California is not scheduled to release any age data until next week, but the health plans already know what they are getting. The President of the California health insurance trade association also said yesterday, "It is important for the exchange to achieve a balance in enrollment between the old and the young and the sick and the healthy to allow costs to be spread among all people."

These Healthcare.gov problems have been a sideshow for Obamacare. The main event will be about whether more than just those who have been "waiting all of their lives" to get guarantee issue health insurance they are sure to make money on will eventually sign-up in adequate numbers.

While these information technology system problems were always going to get fixed, I will suggest the depth of these problems will eventually work against getting the broad based enrollment that is critical. Obamacare started with many Americans being cynical about it. That this is now the butt of jokes on late night TV and the Comedy Channel does not help it.

All of the publicity over those people, including me, who have lost their insurance, does not help either. One story after another has made the media with people talking about how they lost their quality health insurance and now have no option but to pay much higher prices for more deductibles and fewer provider choices. That there is rate shock is no longer in doubt. Those constantly repeated real life stories couldn't help confidence in the law.

The President's apology and the Democratic Capitol Hill stampede to now reinstate those policies only adds legitimacy to that storyline. And, all of the repeated spin by Secretary Sebelius and others, like trying to excuse the Healthcare.gov early problems as just a matter of the program's popularity, has just made people more cynical. This administration now has a giant credibility gap when it comes to Obamacare.

Democrats have been arguing all this time that things will get better when consumers can actually go into the website and see for themselves how good the benefits and prices are.

A single person making $28,725 a year in California would have to pay $193 a month for the second lowest cost Silver plan––10% of their after tax income––for a policy with a $1,500 deductible and a $45 primary care co-pay. Even a person making only $22,980 would pay $121 per month––again 10% of their after tax income––for a $1,500 deductible and a $40 primary care co-pay.

I recently showed these numbers to an undergraduate class of about 50 students. I asked them if young people would buy it. I am not exaggerating here; about half the class shook their heads no and half laughed.

A family of four making $59,000 a year will typically pay $400 a month for a policy with a $2,000 deductible.

A family of four making $71,000 a year will typically pay more than $500 a month for that second lowest cost Silver plan with a $2,000 deducible––again about 10% of after tax income.

And these lowest cost plans will likely have "narrow networks." If they want a better network, and one is available, they will pay more.

In traditional health insurance terms, these are pretty good deals. But, how many of these families have an extra $400 or $500 a month in their checking account for what might look to them to be a piece of paper with a $2,000 deductible?

I will suggest these people will have a very difficult decision to make once they can finally get into the websites.

Getting the first 500,000 likely older and sicker people to sign-up was the easy part––or it should have been.
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