The final numbers from ObamaCare’s 2016 enrollment season are coming in, and it’s another poor showing, even after the White House took pains to lower expectations.
While the headline enrollment figures will match the lowered estimates that President Obama issued last fall, the underlying trends on who’s actually signing up shows that the ObamaCare marketplace is largely stalling.
But conservatives, who’d like to see the entire scheme replaced by a more viable and market-oriented plan, shouldn’t conclude that ObamaCare is about to implode.
The program is gradually finding its niche as an entitlement for what the Census Bureau defines as the “working class” — lower middle-class families that earn too much to qualify for Medicaid, but instead fall into the sweet spot of ObamaCare’s subsidies. Increasingly, these Americans will find themselves forcibly moved into ObamaCare, even if they currently have coverage sponsored by their employers.
ObamaCare’s subsidies and its financial inducements were crafted to carve these Americans out of the existing insurance market, and move them into the exchanges. The indignity here? Many of these families might have secured better coverage at work had ObamaCare not come along. They might also have chosen cheaper healthcare coverage than ObamaCare forces on them, and held on to more of their wages. Increasingly, they’ll no longer have either of these options.
To briefly recap this year’s enrollment figures, late sign ups and automatic renewals pushed the number of people signing up for ObamaCare through healthcare.gov to 8.6 million through the end of 2015, before any attrition. Extrapolating from the current numbers implies that total Obamacare sign-ups will reach about 14 million (once the figures from state-run exchanges are baked in). The White House had previously lowered its 2016 goals, hoping to have 10 million people still enrolled and fully paid at the end of 2016 across the federally run healthcare.gov as well as state-run exchanges. The Obama Administration should hit, or slightly top these estimates, once totals from the state exchanges are factored into the final figures.
For comparison, last year, enrollment topped out at 11.5 million. Around 10 million followed through to purchase plans and 9 million ended up with coverage at year-end, after attrition. Applying the same proportions for this year, Wall Street analysts estimate that about 11 million to 12 million consumers will confirm enrollment by paying for their coverage. About 10 million to 11 million will remain enrolled by year-end 2016. This compares to the government’s revised goal of 10 million, (and an older projection from the Congressional Budget Office for 21 million).
Yet the federal numbers show that the rate of growth in the exchanges has declined year over year, and is mostly comprised of people who were previously covered by some kind of Obamacare plan (71% in 2016). Remember that at the end of the 2015 open enrollment period, the total enrollment across both state-based and the federal healthcare.gov marketplace was up 46% from the 2014 open-enrollment period. That was before any attrition. This year, it looks like the year-over-year growth in the exchanges will come in at about half of that figure.
The age mix of those who are signing up also looks to be tracking, at best, on par with prior years and perhaps a little worse. Remember, Obamacare was always dependent upon more young and presumably healthier consumers signing up for the inefficient plans to help subsidize older and costlier beneficiaries. But many young consumers are choosing to forgo the exchange’s high premiums, even as the government’s penalties for remaining uncovered by a “qualified” plan start to rise. For many of the young, and healthy, ObamaCare’s overpriced plans are a bad deal.
Data that HHS released yesterday on the Federal and state-based exchanges shows that 35% of total Federal and State-based selections were by people younger than 35 thus far for 2016. This compares to 33% during the similar time frame during the 2015 open enrollment period and 29% during the 2014 open enrollment period. For health insurers, the slight improvement in the age mix isn’t expected to be material.
ObamaCare’s acolytes are casting the tepid growth as success. Under their calculus, any expansion is a measure of progress. This math largely draws from how one charts achievement – whether it’s drawn from considerations of economics, or derived mostly from politics. If the goal is merely expanding ObamaCare’s footprint, then each enrollee adds to the political enterprise. But ObamaCare was supposed to be affordable, and self-sustaining. It was supposed to replace the individual and small group markets and the health plans people liked, and couldn’t keep.
Yet even as ObamaCare stumbles, it doesn’t follow that the program crumbles. It will narrow into an entitlement largely for a skinny band of middle class families who qualify for enough extra subsidies to make the program’s overpriced plans affordable. For the most part, these will be individuals and families that earn less than 250% of the federal poverty level annually. That comes out to about $60,000 in cumulative annual income for a family of four people (depending on which state you live in, the income threshold can rise or fall a little). The real sweet spot for ObamaCare, where the subsidies are the richest, is around 200% of the federal poverty level – or about $49,000 in cumulative annual income for a family of four.
This is where ObamaCare’s demographics are already starting to settle out. At these income levels, people benefit enough from ObamaCare’s byzantine subsidy structure to make its health plans affordable. Many of these families also don’t have the sort of jobs that must continue to offer workplace health coverage in order to attract labor. In short time, their employers will dump them into the ObamaCare exchanges.
The most revealing figure to watch isn’t ObamaCare’s total enrollment. It’s the scheme’s economic composition. ObamaCare will narrow itself as a new healthcare entitlement that’s slightly better than Medicaid, for those Americans whose nonetheless modest wages price them out of Medicaid’s expanded coverage.
This demographic reckoning mostly owes to ObamaCare’s special “cost sharing” subsidies. For the segment of Americans who qualify for these federal subsidies, the extra money will make it hard for their employers to keep these individuals out of the exchanges. For the consumers whose income makes them eligible for the full benefit of these subsidies, ObamaCare will be an economically rational choice.
With these special subsidies, those who earn 200% of the FPL will have their out-of-pocket limits capped at $4,500 for a family that buys a benchmark silver plan. By comparison, for those who earn more than 250% of the FPL, and don’t qualify for the subsidy, the out of pocket maximum for a family is set at $13,200.
In many ways, ObamaCare was deliberately crafted as a targeted entitlement for those people who fall into this income band. These subsidies are a key to making ObamaCare’s bloated and costly structure affordable, and making the scheme work.
It’s hard to compute exactly how many Americans this comprises. A rough estimate is that somewhere around 10% of Americans earn between 175% and 225% of the FPL annually. This is where the cost-sharing subsidies are generally the richest. About 15 million Americans earn between 175% and 200% of the FPL, based on calculations made off of the most recent Census data. Consider this ObamaCare’s target market – the income range where the new entitlement will dominate.
Of the 10.2 million consumers who had effectuated ObamaCare coverage by the spring of 2015, 8.1 million were eligible for the cost sharing subsidies. Expect that number to grow this year, along with the number of eligible consumers who actually select more restrictive silver plans, enabling them to bank these subsidies.
Nobody rational wants these families to go uninsured, of course, or struggle to find adequate coverage. But the shame of it is that many of these families could have secured something better than ObamaCare. The Affordable Care Act will inevitably crowd out other coverage options for working class Americans. Nor will people directly from all of the subsidies that they’ll receive. Those subsidies will pay for a lot of healthcare coverage people don’t want, or need, but that a political decision forced on them. The money will also be handed directly to the insurance companies.
As for everyone else, ObamaCare will remain largely unaffordable. A new study found that 10% of ObamaCare customers who earn between two and five times the federal poverty level would have coverage costs that exceed 21% of their incomes.
For insurers, a key questions is whether there’s higher-than-average morbidity in the income demographic where ObamaCare will dominate, and thus higher costs. It would exacerbate the adverse selection already plaguing the exchanges. Some data would suggest that there is a higher background rate of certain health conditions at the working class income ranges that form ObamaCare’s target demographic.
A key number to watch from this year’s enrollment season is the percentage of enrollees who receive cost sharing subsidies. It’s a fair bet that this will be the only number that rises by a notable margin over last year even as the rest of the program stalls. In the end, Americans are rational economic actors. Not only when it comes to who avoids the ObamaCare scheme, but who gets drawn into its grips.
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