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.
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