The Health Insurance Marketplace monthly enrollment report issued this week contained some interesting information. It is too early, and the information is too limited, to really make definitive pronouncements about the Affordable Care Act, but there some results that may be indicative of the health insurance markets of 2015 and beyond.
The big news was the rapid increase in enrollments in the health exchanges over the last month. Enrollment in the health care in Georgia grew from about 6,000 to 58,611 in the month of December. This increase reflects both the desire of consumers to have coverage by January 1, 2014 and the improved functioning of Healthcare.gov website.
Much of the coverage of the enrollment numbers centered on the age distribution trying to discern if Marketplaces were going to attract a sufficient number of younger healthier enrollees to balance out the older sicker enrollees who now have access to affordable coverage. In Georgia about 26 percent of the enrollees to date are between the ages of 18 and 34. Nationwide 27% of those with individual coverage in 2013 were adults are under age 30. That same age cohort accounts for about 30 percent of the uninsured and 20 percent of the group health market. Thus it appears as if the Marketplace is attracting a similar risk pool to what currently exists in the individual health insurance market.
It has been suggested that in an analysis by the Kaiser Family Foundation* that that is the minimum percentage of young people needed to meet expectations and keep the risk pool sustainable without premium increases next year. Open enrollment continues until March so these numbers do not reflect the final numbers or demographics.
To date however, the numbers of people purchasing coverage through the Marketplace are a relatively small percentage of those who previously purchased individual health insurance. For those states with Federally operated the median enrollment in the exchange is about 8% of the number in the entire individual health insurance market in their states. For Georgia, enrollees through the Marketplace comprise about 12 percent of the individual insurance market in the state. That number is 13% for Florida, 9% for Texas, and a whooping 20% for North Carolina.
What explains this larger percentage of enrollment in North Carolina? Comparing Georgia and North Carolina, the weighted average premiums in the Marketplace in Georgia are slightly lower than those in North Carolina, although the variation in Georgia is much greater. Premiums for the second lowest price Silver plan (the premiums that determine the level of the tax subsidy) in Georgia range from $221 to $446. In North Carolina that range is from $210 to $259. So while a majority of Georgian’s face comparable or lower premiums, many Georgian’s face higher premiums than similar North Carolinians.
A higher percentage of individuals in North Carolina are eligible for a premium tax subsidy than are Georgians. Since the subsidy is only available for coverage purchased through the Marketplace that could be part of the explanation for the higher enrollment in North Carolina.
Even in North Carolina these enrollment figures imply that 80 percent of the purchasers of health insurance coverage in the individual market did so outside of the Marketplace constructed under the Affordable Care Act. The vast majority of those who started 2013 with individual health insurance coverage are starting 2014 with individual coverage. In Georgia and in other states many of those individuals re-enrolled in their existing plans for 2014. Which means that later this year they will face a choice of purchasing coverage for 2015 in the Marketplace, purchasing an individual plan outside the Marketplace, or becoming uninsured.
Insurers were also given several protections against risk selection under the Affordable Care Act: a reinsurance program for plans sold in the exchange, a risk corridor that limits insurer risk for the first three years after 2014, and risk adjustment. Reinsurance and risk corridors protect the insurer from unexpected risk variance in the individual market. For consumers that means that wherever they purchase coverage they will be part of the risk pool and will face similar choices. Fears of a adverse selection death spiral would not appear to be grounded in reality.