Obamacare’s most recent open-enrollment period ended with a whimper. According to the latest data from the Department of Health and Human Services, the exchanges signed up 40 percent fewer people than expected.
Many of those who have opted out — and chosen to pay $695 or 2.5 percent of their income, whichever is greater, as a penalty instead — are young and healthy. That’s bad news for both insurers and the future of the exchanges.
Premiums from the young, who don’t consume much care, are crucial to keeping the exchanges solvent. Without enough young enrollees, insurers will lose millions — and may withdraw from the marketplaces. That would bring about the collapse of HealthCare.gov and the exchanges that 12 states (including Rhode Island) and the District of Columbia are running themselves.
Such an outcome is looking more and more plausible.
Last year, the Congressional Budget Office estimated that 21 million people would sign up for coverage in 2016. Earlier this year, they reduced that figure to 13 million. The actual figure? Just 12.7 million.
Even that number may end up being too high. At the end of the 2015 open-enrollment period, the administration claimed that 11.7 million people signed up for coverage. A month later, it turned out that only 10.2 million had active insurance policies.
Then, earlier this month, HHS said that just 8.8 million had active coverage — 25 percent fewer than initially predicted. Five hundred thousand of those who dropped off the rolls couldn’t verify their citizenship. Many people stopped paying their premiums in the last half of 2015.
If history repeats itself this year, then only about 9.5 million people will be active enrollees by the end of 2016.
The demographic mix of enrollees remains a problem, too. Last year, the federal government was hoping that 38 percent of enrollees would be between 18 and 34 years old. That’s because Obamacare needs young, relatively healthy individuals to sign up for coverage to offset the cost of care for older enrollees.
But last year, only 28 percent of those who purchased coverage were in this coveted age group. The same is true in 2016.
Meanwhile, 28 percent of 2016’s enrollees were 55 or older. That’s two percentage points more than last year — and 10 percentage points more than insurers expected during the first open-enrollment period.
In other words, the exchange pool is getting steadily older — and costlier.
What’s more, some are abusing “special-enrollment periods,” which allow people to purchase coverage outside the official open-enrollment period by claiming a hardship like a divorce, job loss, or death in the family. But the federal government has hardly bothered to check whether the hardships claimed are actually legitimate. So thousands of folks are simply buying policies when they need care, then dropping them after their medical bills have been paid.
One-quarter of Aetna’s enrollees last year came through special-enrollment periods. On average, they kept their policies active for just four months. Thirty percent of UnitedHealth’s enrollees were “special.” They were 20 percent more expensive to insure than those who signed up during the open-enrollment period.
The Blue Cross Blue Shield Association’s special-enrollment customers ended up costing 55 percent more than those who enrolled through the standard channel.
It’s no surprise, then, that insurers are losing money on exchange plans. UnitedHealth — America’s largest insurer — suffered $720 million in losses last year after enrolling 500,000 people on state and federal exchanges. It anticipates it will lose another $500 million this year — and consequently, is weighing whether to quit the exchange business altogether. Aetna, meanwhile, lost $140 million on the exchanges in 2015.
American families will ultimately pick up the tab for these losses in the form of higher premiums. Insurers “are starting to strengthen their pricing quite meaningfully,” said Anthem CFO Wayne DeVeydt on a recent conference call.
Obamacare’s exchanges are clearly failing. Premiums are headed higher, and insurers are rushing for the exits. If individuals exit the exchanges too, then they’ll soon collapse.