HealthCare.gov Enrolls 1.1 Million by Year-End––Cause For Celebration or Worry?

After the disastrous launch of Obamacare the enrollment of 1.1 million people in the 36 state exchanges run by the feds is a major accomplishment. It is likely that the enrollment in the 14 state-run exchanges will take total Obamacare's private insurance enrollment to near 2 million for the year.

Does this mean that Obamacare is finally on track and moving toward success?

At least the front-end of HealthCare.gov is now clearly working.

I will suggest there are still some very important questions for Obamacare that need to be answered.

First, how many of these new enrollments are people whose policies have been cancelled under Obamacare?
As I have said on this blog before, I expect at least 80% of those in the existing individual health insurance market to lose their coverage by the end of 2014. Half of the market bought their coverage after March 2010 and therefore cannot continue while most of the other half of the market will not qualify under the Obama administration's stringent grandfather rules.

What we don't know is just how many of these people had to buy new coverage on January 1 given the widespread offers by carriers to "early renew" their coverage into late 2014. Then the President asked insurers and states to allow people to keep their coverage another year. It appears about two-thirds of the states went along with that request. Then many of the cancellations won't occur until they renew throughout calendar year 2014.

We do know that California did not allow insurers to continue coverage for another year leading to 800,000 cancellations on January 1 and 200,000 cancellations by March. The state exchange has said that 300,000 of these are subsidy eligible and they can only get a subsidized policy on the exchange.

California will likely announce they have signed-up about 600,000 people this year. But given the cancellations that are occurring by January 1, is this a big accomplishment?

Washington State cancelled 260,000 policies and also did not allow the cancelled policies to continue past January 1. Half of these polices are subsidy eligible and can only get a subsidized policy in the state insurance exchange. Washington State might report 100,000 private plan enrollments by year-end. But if they cancelled 130,000 people who can only get a subsidized policy in their exchange, is this a big accomplishment?

The good news is that Obamacare will likely enroll almost 2 million people in 2013.

Even if we ignore that fact that many of these people were previously insured and had to replace cancelled policies (there were more than 400,000 subsidy eligible cancellations in California and Washington alone), 2 million people are only 10% of the 20 million uninsured in the U.S. who are eligible to buy coverage in the health insurance exchanges.

If we net out the cancellations, has Obamacare signed up 5% of the uninsured, or 6%, or 7%? Whichever, it's not even 10% net of the cancellations.

Is this relatively small percentage of the uninsured who have signed-up mostly the healthy or the sick?
We don't know for sure. But logic would say that the first people through the door had to include the sickest and neediest people. The smaller the enrollment number, the more likely it is dominated by the sickest. Consider this fact about health and population: 2% of the population accounts for 50% of all health care costs. The long-time underwriting rule is that it takes 70% of an eligible group in order to get a sustainable pool––meaning we need 70% of the 20 million uninsured net of cancellations, or 14 million, for a truly sustainable risk pool.

Will millions more sign-up by March 31?
The Obama administration will now argue that Obamacare has lots of momentum and three months to sign-up a sustainable pool with lots more healthy than sick.

They are right.

Obamacare has three months to attract the people, most importantly healthy people, who have been sitting on the sidelines so far.

Will these people sign-up in adequate numbers to make Obamacare sustainable?

The Democrats have been fond of saying that once HealthCare.gov is working people will be able to go to the site and see for themselves just how attractive Obamacare is.

The front-end of the site is now finally working quite well––in contrast to the very serious back-end issues that still remain.

I suggest you do what the Democrats have been suggesting and visit HealthCare.gov. When you do, you will find that the entry page has a big icon on the left side, "See Plans Before I Apply." Click on that and enter a sample age, state, county, and sample income. You don't have to create an account or enter any personal information. You can take a look at any of the 36 federally run states. The site will show you all of the plans available, including the deductibles and co-pays with premiums that are net of subsidy. Unfortunately, most plans won't let you check out the provider network on the federal site.

Take a look. Put yourself in the shoes of lower middle-class and middle-class people who will likely have to pay 10% of their after tax income, net of the subsidy, for plans with an average Silver plan deductible of $2,567 and an average Bronze deductible of $4,343.

Will millions more buy Obamacare before March 31?

Do your own analysis: HealthCare.gov