Thursday, November 13, 2014

How Many People Have Enrolled So Far in Obamacare's Second Open Enrollment?

Undoubtedly I will hear that question many times in the coming weeks.

The answer is that this enrollment process is so screwed up we will have no earthly idea how many new people have enrolled and how many 2014 enrollees remained on the program until at least April 2015.

Let me try to illustrate.

Let's say George is now enrolled in Obamacare. He is happy to have subsidized and guaranteed health insurance for the first time. He was even been happier to read in the media that the second year Obamacare rate increases would be small.

He was also happy to get a letter just before the Election Day telling him he will be automatically renewed in his current plan.

Then on December 6th George gets his January premium statement. He is paying a lot more! What happened? His insurance company phone lines are suddenly jammed. Seems like a lot of other people got a surprise.

Turns out all of those expert analysts and reporters writing stories about "average rate increases" never heard of the term loaded average––that's when the plan that got 70% market share increased their rates 15% and the rest cut their rates or gave tiny increases.

That is happening a lot in Obamacare this renewal season. Here is a sample list of the rate increases the biggest market share carriers are asking for:


This is all compounded by something called the baseline Silver Plan's effect on subsidies. The second lowest cost Silver plan in any market determines what a person's subsidy will be. Last year, that plan was probably the plan that got the biggest enrollment and also the plan with the biggest rate increase this year. So, it's probably the plan George has.

In fact, you might recall a recent briefing paper by actuarial firm Milliman in which they pointed out that even a modest increase in premium by market leaders of 5% could lead to net after subsidy cost increases of 30% to near 100% for subsidized enrollees.

But because George's plan is no longer the baseline plan, even though George is on subsidy and he is supposed to be shielded from any rate increase by the taxpayer, his premium is going up unless he changes to the insurance company that now holds the honors as having the second lowest cost Silver Plan.

So, George scrambles, in the very few days between his getting his January premium invoice (likely about December 6th) and the January 1 cut-off for open enrollment on December 15, to sign-up for that lower cost plan and save his full subsidy.

But then George's friend Mary tells him that the new second lowest cost Silver Plan is one of those terrible narrow network plans that restricts providers in order to be able to charge the lowest rate and suggests he sign up for a third plan that costs a little more but has his doctor in the network.

So, how many enrollments will the Obama administration and the insurance companies be counting here on their far from finished Obamacare backroom system?

George's first carrier will count him because it was too much bother for George to figure out whom to call to cancel his coverage––he will just not pay the bill. But his carrier, by regulation, can't knock him off the rolls for three months––not until April 1.

George enrolled in his second choice but never bothered to pay that bill but the carrier will count him likely into February as the health plans give people plenty of time to pay their bill in what will be a very confusing situation.

And, of course, George's third carrier will count him.

So, that is one person being counted three times and we won't have just George's status cleared up until George's 2014 carrier can delete him from its rolls in April.

So, how many people have enrolled in Obamacare say, by December 1, or December 15, or January 1, or February 1?

I will have no frickin idea, don't even ask.

So much for Healthcare.Gov working really well.

But I am sure the Obama administration will be telling us the website, call centers, and carriers are very busy with people all excited about Obamacare. They just won't be defining excitement.

Monday, November 10, 2014

Is the Administration Low-Balling Their 2015 Obamacare Enrollment Estimate?

Well, with an estimate of only 9 million to 9.9 million, apparently they are. But I will suggest the focus should not be on anybody's estimate for 2015 but rather on how many people need to enroll in Obamacare to make it sustainable.

A few points:
  • The Kaiser Family Foundation estimated that when Obamacare launched in 2014, 17.2 million people were eligible for subsidies.
  • The only place you can get an Obamacare subsidy is in the state and federal health insurance exchanges.
  • The longtime insurance industry underwriting rule is that you need 75% of an eligible group to be confident of a sustainable risk pool––that is enough healthy people paying in to offset the cost of the sick people.
  • So far 85% of those who have purchased health insurance in the exchanges are receiving a subsidy. 
  • The insurance company "3Rs" reinsurance program, that protects the carriers from most Obamacare underwriting losses, expires at the end of 2016.
So, Obamacare needs to have a sustainable population participating by the time the insurance company support expires at the end of 2016.

While many more people will enroll off-exchange, the number of the subsidy eligible population enrolling is an easy number to get and, I will suggest, serves as a pretty good proxy for Obamacare's success.

It's a fairly easy calculation to figure out how many people we need in the Obamacare exchanges to be confident the program will be self-sustaining.

First, we need 75% of those 17.2 million who were subsidy eligible in the first place, or 12.9 million.

Presuming that 85% of those in the exchanges continue to be on subsidy, we would need a total of 15.2 million (12.9 million getting a subsidy and another 2.3 million not on subsidy) in order to reach a sustainable level.

Now, the 75% threshold is a guideline. Maybe the right number the exchanges need to hit is 14 million, or maybe it is 16 million. But this is the ballpark we need to be in.

The Congressional Budget Office (CBO) has estimated that 13 million will buy health insurance in the Obamacare exchanges by the end of 2015. To stay on a sustainable enrollment track, that 13 million estimate makes sense to me––leaving a net gain of only another 2 million in the third and final year of open enrollment.

Today, the administration said that their goal is for 9 million to 9.9 million to be purchasing health insurance on the exchanges by the end of 2015.

Is that a low-ball estimate designed to manage expectations?

Apparently. But playing expectation games is not what they need to be successful at.

Enrolling enough people for a sustainable insurance pool by the end of 2016 is what they will need.

If Obamacare isn't up to a sustainable enrollment level by the time the health insurance company reinsurance protections expire at the end of 2016, the 2017 rate increases will be huge.

Those 2016 rate increases will be released on about Election Day 2016.

Low-balling expectations might buy you some short-term media puff.

But if they don't get this thing to a sustainable enrollment level by November of 2016 no one will remember their latest PR campaign.

Friday, November 7, 2014

Supreme Court Takes the Obamacare Subsidy Case--Justices Will Rule Before July 1

In a Wow moment, the Supreme Court announced Friday that they will take one of the four pending "Halbig" cases––specifically King v. Burwell.

The issue is over whether the new health law actually authorizes the payment of premium subsidies in the 37 states that will rely upon the federal government to run their exchange in 2015.

This effort is being made on a number of fronts but has been generally know as the "Halbig" challenge. I guess we will now call it the King challenge.

If the Supreme Court eventually affirms this challenge, anyone receiving a health insurance subsidy in the 37 states run by the feds would immediately lose it. Given that the bulk of those currently getting subsides are at the lower income range for those subsidy eligible, most would likely drop their Obamacare insurance unless they were so sick it made sense for them to beg, borrow, or steal the money they would need to continue making premium payments.

The result would be a much smaller Obamacare insurance pool disproportionately filled with sick people.

Even if a state rushed to convert its status to that of a state exchange in order for its citizens to continue to receive their insurance subsidies, the process would take at least months. In the reddest states that have been fighting Obamacare, it could take far longer. In the meantime, the entire off and on exchange individual health insurance market in these states would be dramatically destabilized.

I recently participated in a forum at the Cato Institute examining the latest federal court challenges to the Affordable Care Act.

A panel of legal scholars presented the case for and against the Halbig challenge. In the end, it sounded like a draw to me. Believing the Supreme Court would not want to wreck something as big as Obamacare unless they had an overwhelming reason to do so, I am left with the sense that King will not prevail. Don't forget Chief Justice Roberts had that chance two years ago and didn't wreck it.

But the mere fact this case is now officially before the Supreme Court means the challenge many supporters of the Affordable Care Act have called the greatest existential threat to Obamacare has to be taken seriously.

I was sort of the skunk at the garden party for suggesting the immediate impact of King would be nothing short of devastating in the 37 state individual health insurance markets––on and off the federal exchanges.

I have been a critic of Obamacare. But I also believe the way to solve this is through the political process where change can occur in a way that provides those now covered a soft landing during the transition, not in the courts where an affirmative finding for King would instantly destabilize the insurance markets in these states leaving millions uncovered until each of the states––or the federal government––could work out a solution.

For those of you interested in this case and the impact it could have, I suggest you take a look at the Cato video of some of the specific presentations (each speaker was limited to twelve minutes).

I will suggest that the case for King was best made by Jonathan Adler and the case against was best made by David Ziff and can be seen here.

My panel debating the impact King would have on the insurance markets can be seen here.

Obamacare just had a terrible week.

Supporters had expected that a year after its launch the new health law would be well entrenched because of popular support. But on Tuesday, voters made it clear that the debate over Obamacare is nowhere near over.

Then on Friday, the Supreme Court announced they aren't done with the law over an issue that could immediately kill the insurance subsides for millions.

All of this on the eve of the second open enrollment.

Obamacare has not cleared the tower.

    Wednesday, November 5, 2014

    Obamacare: Death By a Thousand Votes?

    We didn't see a Republican tide on election night.

    We saw a Republican tsunami.

    A year after Obamacare went into effect and Democrats said people would come to support it voters gave one Republican candidate after another, who made Obamacare a big part of each of their campaigns, one victory after another.

    So, how will the Republicans use their convincing result on Obamacare?

    Republicans will not have the votes to override any presidential vetoes nor will they have the 60 Senate votes needed for full repeal. But the Republican Senate can now pass lots of anti-Obamacare legislation using budget rules. Remember, the Supreme Court said the individual mandate penalty is a "tax." The health insurance company "3Rs" reinsurance provisions are revenue related. The Obama administration's recently using regulation to take the caps off the reinsurance program is clearly a spending item. The medical device tax could well be a bipartisan target, as would the employer mandate. And, so on.

    The even bigger House majority will be happy to go along with the Senate's forcing Democrats to vote on one unpopular piece of Obamacare after another––and then forcing Obama to veto them.

    Obamacare will not be repealed or fundamentally changed in the next Congress.

    But the Republicans now have the opportunity to prepare the table for 2017––so long as they don't overplay their hand.

    What this election result has guaranteed us is that the Obamacare debate is not over.

    Friday, October 31, 2014

    Health Insurers "Expect at Least 20% Growth" From 2015 Enrollment

    That was the lead in a Reuters story this morning saying, "health plans expect at least 20% growth in customers and in some states anticipate more than a doubling in sign-ups" from the 2015 Obamacare open-enrollment.

    Well they better do a hell of a lot better than that!

    The CBO has estimated that 13 million people will ultimately be covered in the Obamacare insurance exchanges in 2015.

    The administration recently announced they had 7.3 million covered as of mid-August.

    Actually, I expect they will have closer to 6.5 million at year-end based upon the reports of monthly attrition I have had from carriers.

    7.3 million or 6.5 million, the administration has to about double the current enrollment to stay on track toward getting a sustainable pool by the time the Obamacare "3Rs" insurance company reinsurance provisions expire at the end of 2016––a sustainable pool is typically considered to be about three-quarters of an eligible group.

    The Reuters article goes on to talk about a number of very small insurers, some the new co-ops, that got little in the way of enrollment in 2014 and have now cut their rates in order to gain market share––not afraid to so because of the reinsurance provisions that absorb most losses. Reuters says these plans are optimistic that they could double their customer base. Well twice nothing is still very little.

    Carriers increasing their Obamacare enrollment by 20%?

    That is about a fifth of what they need in 2015 to get this thing to "clear the tower."

    Reporters have never been very good at math.

    Sunday, October 19, 2014

    Figures Don't Lie But Liars Figure––Will There Be Some Obamacare Rate Shock in 2015?

    Hanging around actuaries as long as I have one of the old sayings I picked up was, "Figures don't lie, but liars figure."

    I have read one story after another this summer and fall about the modest Obamacare rates increases––or decreases––for 2015.

    On this blog you have also seen me write about the complex way the 2015 Obamacare rates will hit people particularly because of the impact the changes in the so called second lowest cost Silver plan will have on so many people's final subsidy. You have also seen me write about the fact that we really won't know what Obamacare costs people until the now unlimited Obamacare reinsurance program stops subsidizing insurance rates in 2017.

    Recently, the Kaiser Family Foundation provided a report pointing out that the cost of the benchmark Silver Plan would fall 0.8% in sixteen cities they researched:

















    Kaiser also reported that the lowest cost Bronze plan after tax credits in these markets would rise an average of 5.9%

    But now, Investor's Business Daily is out with another look at those sixteen cities and they found that the cost of the cheapest Bronze Plan for a 40-year-old non-smoker earning 225% of the poverty level ($26,260) will jump an average of 13.9%.






















    What's the big difference between the Kaiser Family Foundation's (KFF) approach and that of Investor's Business Daily (IBD)? IBD says the difference has to do with KFF assuming a person's income hasn't changed instead of rising at least with inflation and the impact a falling Silver baseline plan's cost has on the Bronze Plan subsidy (You can read the detailed explanation in IBD's article and get a link to the KFF study here).

    Who's right? Or, who is more right? Or, which assumptions are the most representative? Or, more fair? Or, would this outcome have been different if the researcher would have used 250% or 175% of the poverty level instead of 225%?

    I don't think that any of that is the real point (although it would appear that the Kaiser Family Foundation failed to tell us about the whole picture when they issued their study).

    I will suggest the important point here is that for people to know how Obamacare will really impact them in 2015 they need to take a look at what Obamacare is offering them for 2015.

    But these consumers can't now know the real impact in the 36 federally run insurance exchanges and most states that run their own exchange

    Because in the federal states the Obama administration won't open the websites or let carriers post their new rates until the Obama administration signs off on the 2015 rates.

    And, the administration has said that won't happen until a few days after the upcoming November 4th election.

    Monday, October 13, 2014

    Wednesday, October 8, 2014

    The Most Transparent Administration Puts a Gag Order on HealthCare.gov Testing

    With the second Obamacare open-enrollment beginning on November 15th, the enrollment system's testing begins with insurance companies this week.

    Of course, last year the enrollment system testing was a real mess resulting in a humiliating Obamacare launch for the administration.

    Up until now I wasn't expecting any major problems with HealthCare.gov's consumer enrollment system given all of the lessons learned and the new people running things.

    But apparently, the administration is pretty worried about what could happen.

    According to this morning's Wall Street Journal the administration has emailed insurers that it will require "all testers to acknowledge the confidentiality of this process to access the testing environment." The administration reminded insurers that their confidentiality agreement with the Obama administration means that insurance executives "will not use, disclose, prescribe, post to a public forum, or in any way share Test Data with any person or entity, included but not limited to media..." This includes any "results of this testing exercise and any information describing or otherwise relating to the performance or functionality" of the Obamacare enrollment and eligibility system.

    My first reaction was, What's their problem? We're going to know just how well the second version of HealthCare.gov works in just six weeks anyway.

    Then it occurred to me there is this election in just four weeks.

    They don't appear to have a lot of confidence in HealthCare.gov version 2.0!

    Should the rest of us be worried?

    Wednesday, October 1, 2014

    One Year Later: The Affordable Care Act's Launch on October 1, 2013––So How Did it Go?

    Here unedited is what I posted on September 29, 2013:

    The Affordable Health Care Act's Launch On October 1st––So How Did it Go?

    Unavoidably, that will be the big question come Tuesday.

    But there will be much more to it than that.

    A 180-Day Open Enrollment––Not a One-Day Open Enrollment
    What happens on the first day, for good or bad, will constitute only a tiny percentage of the open enrollment period. Consumers will likely visit the new websites many times before they make any decisions, and that is exactly as it should be.

    Friday, September 19, 2014

    The "7.3 Million"

    The administration finally released the Obamacare enrollment count this week.

    Like everything else about their scorekeeping we got a number. Just one number. A number that was conveniently better than we had expected. And, we got no real context for the number or any of the back-up information.

    Sunday, September 7, 2014

    The Next Chapter of Obamacare

    Welcome back from the summer.

    It's been pretty quiet lately on the Obamcare front.

    So quiet, that there has been a flurry of articles recently over how Obamacare has dropped to a second or even third tier issue and will hardly matter come election-time.

    Wishful thinking.

    Obamacare has largely been out of the news cycle for a couple of months but that is about to change.

    A few thoughts.

    The 2015 rate increases have been largely modest. Does that prove Obamacare is sustainable? No. You might recall that on this blog months ago my 2015 rate increase prediction was for increases of 9.9%.

    Tuesday, July 22, 2014

    Halbig Decision Puts Obamacare Back on the Front Burner and Will Give Republicans a Huge Political Headache

    Today's 2-1 decision by the DC Court of Appeals striking down federal premium subsidies, in at least the 27 states that opted for the feds to run their Obamacare insurance exchanges, has the potential to strike a devastating blow to the new health law.

    The law says that individuals can get subsidies to buy health insurance in the states that set up insurance exchanges. That appears to exclude the states that do not set up exchanges––at least the 27 states that completely opted out of Obamacare. Another nine states set up partnership exchanges with the feds and the impact on those states is not clear.

    The response by supporters of the law, and the IRS regulation that has enabled subsidies to be paid in the states not setting up exchanges, hinges on the argument that the language is at worst ambiguous and the Congress never intended to withhold the subsidies in the federal exchange states.

    But in the DC Court ruling one of the majority judges said, "The fact is that the legislative record provides little indication one way or the other of the Congressional intent, but the statutory text does. Section 36B plainly makes subsidies only available only on Exchanges established by states."

    My own observation, having closely watched the original Obamacare Congressional debate, is that this issue never came up because about everybody believed about all of the states would establish their own exchange. I think it is fair to say about everyone also believed a few states would not establish their own exchanges. Smaller states, for example, might opt out because they just didn't have the scale needed to make the program work. I don't recall a single member of Congress, Republican or Democrat, who believed that if this happened those states would lose their subsidies.

    Thursday, July 17, 2014

    "Biggest Insurer Drops Caution, Embraces Obamacare"

    Kaiser Health News is out with that headline today reporting that UnitedHealthcare is expanding its Obamacare exchange presence planning to sell polices "in nearly half the exchanges next year." The story goes on to report that United's leadership is saying the new public marketplaces look sustainable.

    There may be more to it than that.

    Friday, June 20, 2014

    Kaiser Family Foundation Survey Finds Most People Who Bought Health Insurance on the Exchanges Are Happy With It and That 57% Were Previously Insured––No One Should Be Surprised On Either Count

    Let's take a look at both of these headlines:

    Most People Are Happy
    But Kaiser only asked the people who bought health insurance on the exchanges if they were happy with what Obamacare offered them.

    As I have said before on this blog, two out of three subsidy eligible people did not buy a health insurance plan in the first open-enrollment.

    Wednesday, June 18, 2014

    Obamacare: What About the Working Class and the Middle Class?

    The administration issued a report yesterday that says individuals who selected plans in the federal health insurance exchanges have a post-credit premium that is on average 76% less than the full premium for the plans they selected. And, 69% are paying less than $100 after the subsidies––46% are paying $50 or less.

    The administration also pointed out that 65% of individuals selecting the Silver Plan in the federal exchange chose the lowest or second-lowest cost Silver Plan.

    As I have said before, only about one-in-three subsidy eligible people bought and paid for coverage during Obamacare's first open-enrollment.

    It would appear from this data that it is the lowest income people who are most often signing up for coverage. They are the ones who get the biggest premium subsidies as well as the reductions in their deductibles and co-pays.

    Tuesday, May 13, 2014

    With the November Election Six Months Away Obamacare is Up For Grabs

    House Energy and Commerce Committee Republicans seemed surprised last week when representatives of the insurance industry reported that they didn't have enough data yet to forecast prices for next year's health insurance exchanges, the market was not about to blow up, and that so far at least 80% of consumers have paid for the health insurance policies they purchased on the exchanges. The executives also reported there are still serious back-end problems with HealthCare.gov––particularly in being able to reconcile the people the carriers think are covered and the people the government thinks are covered. These are all things that you have read about a number of times on this blog.

    The insurance companies are doing their best to make Obamacare work.

    Why?

    Tuesday, April 22, 2014

    Obamacare Observations From the Marketplace

    A few observations from my travels and conversations in the marketplace:

    About half of the enrollments are coming from people who were previously insured and half are not. When I try to gauge this, I go to carriers who had high market share before Obamacare and have maintained that through the first open enrollment. Some carriers have said only a small percentage of their enrollments had coverage before but health plans only would know who they insured before.  By sticking to the high market share carriers who have maintained a stable market share and knowing how many of their customers are repeat buyers, it's possible to get a better sense for the overall market. Other conventional polls have suggested the repeat buyers are closer to two-thirds of the exchange enrollees.

    The number of those in the key 18-34 demographic group improved only slightly during the last month of open enrollment so the average age is still high. The actuaries I talk to think this issue of average age is made to be far more important than it should be. It is better to have a young group than an old group. But remember, the youngest people pay one-third of the premium that older people pay. The real issue is are we getting a large enough group to get the proper cross section of healthy and sick?

    Monday, April 14, 2014

    Virginia Should Take the Obamacare Medicaid Expansion Money and So Should All Republican States

    In a September 2012 post on this blog, I said that Republican governors should be expanding their Medicaid programs under Obamacare. I argued that Republicans have long called for state block grants and the flexibility to run their own Medicaid programs in what are the state "laboratories of democracy."

    I made the point that, given the then recent Supreme Court decision enabling states to opt out of the expansion, the Obama administration would be hard pressed to deny any reasonable proposal from Republican governors. If Republicans really believed in state responsibility and flexibility for how they run their Medicaid programs, this was the opportunity to prove it. (See: The Medicaid Controversy––The Republican Governors Should Put Up or Shut Up)

    Since then, a few Republican governors have taken that tack and the Obama administration has been very cooperative and flexible.

    Tuesday, April 1, 2014

    Mission Accomplished?––7.1 Million––Will the Obama Administration Come To Regret Today's Obamacare Enrollment Announcement?

    Politics is about expectations.

    The Obama administration blew the doors off Obamacare's enrollment expectations this week and scored big political points.

    But in doing so, they may have set Obamacare's expectations going forward at a level that can only undermine their credibility and that of the new health law.

    What happens when the real number––the number of people who actually completed their enrollment––comes in far below the seven million?

    What happens when the hard data shows that most of these seven million were people who had coverage before?

    What happens when it becomes clear that the Obamacare insurance exchanges are making hardly a dent in the number of those uninsured?

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