ObamaCare enrollment is failing. The White House conceded that fact last week when HHS Secretary Sylvia Matthews Burwell announced a revision of 2016-projected enrollment. In a stunning admission of defeat, she projected an improved enrollment of only 1.3 million more than in 2015 to 10.4 million in 2016.
She conceded that even those modest projections would be a “challenge” since only one of four eligible people was choosing to enroll on the ObamaCare exchanges. The reasons for their reluctance were discussed in my last post (White House Concedes ObamaCare Failure).
What are the implications of these failing enrollment numbers?
Robert Laszewski, insurance industry analyst, helps us understand the implications of these declining enrollment projections. The White House announcement concedes that only 9.1 million are currently enrolled and there are 19 million in the “addressable market” – those who are eligible but have not signed up. That means there are a total of 28.1 million people who could be in the ObamaCare insurance exchanges.
By the HHS projections of enrolling about 10 million during 2016, they would only have signed up 36% of the potential market of 28.1 million. Laszewski says there is an insurance industry standard that dictates you must enroll 75% of an eligible group in order to have a healthy insurance program. This is necessary so that the pool of insured have the right mix of healthy and sick people so that insurance costs are manageable.
The new HHS projections, even if fully accomplished, would have only half of the population needed to make the program sustainable. Enrollment of 36% of the eligible population doesn’t come even close to achieving a healthy insurance program. Combine that fact with the historical fact that their projections in the past have been consistently overly optimistic and failure is inevitable.
Laszewski summarizes the situation:
“This is why, in 2016, ObamaCare needs to almost double the number of people it insures in the exchanges to be financially viable and offer consumers affordable plans, not the flat open enrollment the administration is projecting.”
There’s more bad news for the insurance industry. Last month the Obama administration announced that it would only pay 12.6% of the ObamaCare “risk corridors” reinsurance payments the health insurance companies requested based upon their 2014 claims experience.
This ObamaCare reinsurance program was originally designed to be revenue neutral – those insurers making a profit would pay as much into the scheme as those insurers losing money would take out. But the actual experience was those insurers losing money asked for eight times more money than those making money put into the pool!
The reason is that insurers have been pricing their policies artificially low to gain market share, knowing that the bailout provisions of the law would come to their rescue if they lost money. Now those with the largest claims experience have suffered the largest losses and their looking for their promised bailouts.
This explains why the 2016 premium prices are increasing so much even before the end of the bailout provisions of the law in 2017. What that means is that the premium prices and deductibles they’ve been charging since 2014, which many have complained are already too high, will get much higher in the next year.
Has the Obama administration given up on ObamaCare?
Laszewski says we should consider these facts:
- ObamaCare is a monopoly – you can only buy individual health insurance from ObamaCare compliant insurance companies.
- Health insurance is something people would much rather have than not – no one wants to be uninsured.
- If you make less than 400% of the federal poverty level ObamaCare will help you pay for it.
- If you don’t buy it you are subject to being fined 2% of your income in 2015 and 2.5% of your income in 2016.
Yet, despite these incentives, enrollment remains unattractive.
Why isn’t ObamaCare growing?
The plain truth is that the value of the insurance plans is poor when compared to the cost for all but those who receive the largest subsidies.
The Future Looks Ominous
The situation is unlikely to improve. Many ObamaCare supporters contend the risk pool is going to get better as the sick people who shoed up in the early part of the program return to good health improving the overall risk pool. This is unrealistic since most of these people are being treated for chronic conditions that will require ongoing long-term care.
Laszewski points that the more likely scenario is that each open enrollment period will be just another bad dream lived over and over as the healthy people will disproportionately cycle out of the pool and the sick people will disproportionately cycle into it. He says, “In health insurance industry terms, we will just keep churning the block with no underwriting improvement.”
The inevitable result of such an unstable insurance market will be the so-called “death spiral” – an insurance market that cannot sustain itself without increasing government support (by the taxpayers) because the cost of insurance becomes so high no one wants to buy it.