Thursday, March 26, 2015

Headline: "Exchanges Struggle to Enroll Consumers As Income Increases" It's Because of the Obamacare Dichotomy

Here is an excerpt from a post on this blog from June 21, 2014:
Kaiser Family Foundation Survey Finds Most People Who Bought Health Insurance on the Exchanges Are Happy With It

This week the administration reported that 76% of those who received a subsidy paid 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.

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.

So, the Kaiser Family Foundation has found that these people who are having their premiums and deductibles disproportionately subsidized are happy with their coverage. Hardly a surprise. If you paid for most of my insurance and cut my deductibles from the standard levels I'd be pretty happy too.
My sense has always been that Obamacare appeals to people very differently depending on their incomes. I will call it the Obamacare dichotomy: Poorer people get by far the lowest premiums and deductibles from Obamacare and working class/middle class/wealthier people, who pay very high premiums for high deductible plans, get relatively very little from it.

Why do most people express dissatisfaction with Obamacare in most of the polls? Why did Obamacare fare so badly in the last election? It seems to me that all of this has to do with who benefits and who does not.

This week consulting firm Avalere found the same enrollment breakdown I pointed to last June between the poor and the middle class after analyzing the most recent enrollment reports from the government:
"New analysis finds that while exchanges have succeeded in enrolling very low-income individuals, they continue to struggle to attract middle and higher income enrollees."
Here is the chart Avalere published looking at enrollment and the federal poverty level:

 Their report went on to say:
"Exchanges will need to attract higher income consumers to ensure enrollment continues to grow over time. 

But then Avalere said:
"So far, tax credits do not appear to be enough to entice participation, so greater emphasis on individual mandate penalties may be needed to help increase enrollment among low- and middle-income individuals."

As Avalere has reported before, the average Silver Plan deductible is now up to almost $2,700 a year. The problem for those not having their premiums and deductibles heavily subsidized is that Obamacare offers a lousy product.

We don't need to put more emphasis on the penalties for not buying Obamacare; we need attractive insurance products people want to buy.

Looking at the chart, only 20% of those eligible making between 251% and 300% of the poverty level bought Obamacare. Why?

According to the Kaiser Calculator, a family of four making $60,300 a year (253% of poverty) would still have to pay out premiums of $4,934 a year (8.18% of household income) for the second lowest cost Silver Plan after their Obamacare subsidies. The good news is this is about half the price of an unsubsidized policy.

The bad news is this is still costing this family $4,934 a year for a policy with a deductible of almost $2,700. How many families making $60,000 have an extra $4,934 in their budget for a policy that will likely pay them almost nothing?

Apparently, many of these families have concluded that they are better off staying uninsured and paying for their health care costs out-of-pocket.

Of course if someone in the family is really sick, this can be a great deal.

And therein lies the challenge as the administration tries to sign-up enough healthy people to offset the cost of the sick.

I will suggest the answer is not a "greater emphasis" on the individual mandate penalties when people choose not pay more than they can afford for a lousy product.

I have also heard some argue that the problem is that Obamacare needs more emphasis on outreach––those not buying just don't know how good the benefits are. More outreach will do no good as long as the Obamacare value proposition for these people is unacceptable to them.

Giving people health insurance choices they find worth the money is the answer.


Consumer-Friendly Obamacare Fixes - USA Today Op-Ed


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