ObamaCare has once again overpromised and underdelivered. The 2016 enrollment period has just come to an end and once again the numbers don’t add up to success.
Robert Laszewski, insurance industry analyst, writes of his skepticism in December 2015 when President Obama triumphantly announced 6 million enrollments and talked of “unprecedented demand” on the exchanges. Now he says his skepticism was warranted.
The Obama administration just announced that 12.7 million people signed up for coverage in the Affordable Care Act’s exchanges. The CEO of Healthcare.gov claimed victory saying, “We knocked the lights out this year. We did a great job.” Laszewski begs to differ. He explains why:
In 2015, the exchange enrollment totaled 11.7 million. By year-end 2015, that number shrunk to 9.1 million – a 22% decrease. That administration has said their goal is to have 10 million insured through the exchanges by the end of 2016.
If all 12.7 million of these enrollments complete their enrollment and pay for their coverage – those who signed up for March 1 effective dates have until the end of February to pay – and the same lapse occurs as occurred in 2015, they would have 9.8 million still covered at year end. Again, presuming all 12.7 million end up completing their enrollment, the Obama administration achieved an 8.5% growth over the 2015 enrollment.
According to an October Urban Institute study, by the end of June 2015, only 35% of those eligible for a subsidy in the ObamaCare exchanges had enrolled. If the administration can increase that by 8.5% this year, the ObamaCare take-up rate for those Americans who are subsidy eligible would be about 38%. Historically, insurers want to see a 75% participation rate to ensure they have enough healthy people signed up to pay for the sick.
Several critical observations are worth noting:
- The 8.5% enrollment increase is a tepid response in a year when the tax penalty for failure to enroll increased to its maximum under the law.
- ObamaCare is a monopoly for individuals – there are no other options – yet only a small percentage of the eligible population has signed up.
- Most health insurers are reporting huge losses on the ObamaCare exchanges already – and the “3Rs” bailout provisions don’t expire until 2017. The real costs of ObamaCare will be passed on to consumers after that.
Reasons for Failure
The simple truth is that the Affordable Care Act is unaffordable. Never has a legislative bill failed more miserably to live up to its name. Yes, it’s true that many poor Americans can get an insurance policy for as little as $100 a month. But even those will have trouble paying the deductibles that average nearly $6000 a year.
For most Americans who are not living just above the Federal Poverty Level (FPL), ObamaCare costs more than its worth. The Urban Institute found that more than 80% of those earning between 100% and 150% of FPL signed up for ObamaCare but only about 30% of those earning between 200% and 300% of FPL. For those earning between 300% and 400% of FPL, only 14% signed up. The rest have decided that paying the Individual Mandate tax for failure to have insurance is a better deal than purchasing the insurance.
Here are some real-life examples for a family of four, parents age 40, making $60,000 per year that explains the problem. Even with a small subsidy, their plan costs are seen below:
Location Cheapest Bronze Plan Cheapest Silver Plan
Omaha, Nebraska $8,700/yr – $12,990 deductible $11,112/yr – $7000 deductible
Eugene, Oregon $7,920/yr – $10,000 deductible $9,768/yr – $4000 deductible
Manchester, N.H. $7,212/yr – $12,600 deductible $9,336/yr – $7000 deductible
If you combine the premium cost and the deductible you get the total out-of-pocket costs of each plan per year. The cheapest of these examples will cost the family $13,768 per year and the most expensive will cost $21,690 per year. Where does a family making $60,000 find that kind of money?
Do your own analysis by going to Healthcare.gov and click on “Want to Preview Plans Before You Start”, pick your zip code and plug in your family information. You’ll find just what Laszewski is saying – it’s unaffordable.
He says, “The ObamaCare product just isn’t worth buying if you have to pay anything more than a poor person has to pay for it. Or, if you’re sick and will easily make your money back. Most insurance companies are losing money today under ObamaCare because not enough healthy people have signed up. They were hoping that the 2016 enrollment would change that. It has not.”
Changes are coming for ObamaCare. It’s inevitable.