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New California Numbers Show Disproportionate Enrollment by Those Over 55

California has frequently been cited as an early Affordable Care Act success story with enrollment coming at least closer to projected numbers than in other states. This week’s release of information from Covered California, the state entity organizing enrollment there, shows a mixed picture about the likelihood that the ACA will become a stable source of non-discriminatory relatively inexpensive health insurance in the nation’s most populous state.

A highlight from the report is that 79,891 have at least gotten as far as selecting a plan since enrollment opened on October 1, 2013.  That’s better than any other state and better — at least as of the last report — of all the other states combined using the healthcare.gov portal.

And, because, contrary to the wishes of California Insurance Commissioner Dave Jones, Covered California has decided not to permit those with recently enrolled in underwritten individual health insurance to “uncancel” policies that do not provide Essential Health Benefits, there is the potential to add more people to the Exchange pools than would otherwise be possible.

Additional good news: the pace of enrollment has picked up over the past two weeks.

Still, to date, the 79,891 who have at least selected a plan are only 6% of the 1.3 million that the federal government projected California would enroll through 2014. And the web site in California appears to be working acceptably.

Perhaps the news on the number of enrollees is equivocal.  It’s better than other states, and it’s still early, but, relative to the projections on which the ACA was premised, it is not good at all.  There is also, however, what appears to me to be distinctly troubling news coming from California.  We have another report on the age distribution of enrollees: so far, it is disproportionately old. And this is true in the state in which enrollment has progressed the furthest and in the nation’s most populous state. So, the data is potentially significant not just as an augury of what may be seen in other states but because a disproportionately elderly population in the largest state is, in an of itself, a problem.

Although persons age 55 through 64 constitute about 18% of the California population aged 18 through 64, they constitute double that, 36%, of persons in that same age segment who have enrolled for a plan. Similarly, although persons age 45 through 64 constitute about 41% of the California population, they constitute 59% of those who have enrolled thus far. As discussed earlier on this blog and elsewhere, because premium ratios between old and young are capped at 3 to 1, whereas actual claim ratios are likely to be higher, disproportionate enrollment of the elderly can help drive an adverse selection death cycle.  This would be all the more true if the older people — it’s hard to call people age 55 “elderly”” —  that are enrolling are disproportionately unhealthy relative to their age-group peers. Claims, therefore, by Covered California Director Peter Lee that “enrollment in key demographics like the so-called young invincibles is very encouraging” rest on theories of economics and statistics that I do not understand.

A Side Note on Market Concentration

By the way, who’s on the hook in the event the ultimate pool is distinctly more expensive than insurers anticipated?  It’s the usual suspects. The big “winners” in California thus far are the usual suspects: Anthem Blue Cross has 28.1%, Kaiser Permanente, a California fixture, has 26.8%, Blue Shield of California has 25.6% and Health Net (with headquarters in Southern California) has 15.7%. Together, these four have 96% of the market with a “Herfindahl Index” of a moderately concentrated 2410. Dreams, therefore, of new competitors entering the marketplace, thus far seem illusory.  But it is these “winners” that stand to lose the most money — and be the greatest recipient of federal redistributions under Transitional Reinsurance, Risk Corridors and Risk Adjustments – in the coming year if the trends hold up.

Seth J. Chandler is a Professor of Law at the University of Houston at the University of Houston and author of acadeathspiral.org, where this post originally appeared.

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  4. Once upon a time, PPACA was passed on the promise of providing insurance options to the uninsured and bending down the total health care cost curve. I do not recall the argument being the tax payers will subsidize:
    1) The California exchange to the tune of over a billion dollars (that’s more than the federal exchanges for 34 states). I wonder how much of that billion is for the voter (democrat) registration function including acorn, unions, and various other democratic shills.
    2) A bunch of individuals that already had insurance. Why are there no numbers in this report showing how many of the supposed enrollees that already had insurance and are only running the tedious and security compromised gauntlet of the exchange simply to pick up tax payer subsidies.
    Remind me again how any of this subsidizing is lowering the number of uninsured or bending down the total cost curve.

  5. Note to Archon 41:

    Americans might support higher taxes if they felt that the benefits were at least going to themselves. Right now, many people are opposed to higher taxes because they think that the shiftless poor are getting all the new programs.

    Americans have accepted higher social security and Medicare taxes numerous times over the past 50 years. Although the increases have to be very gradual and very quiet,

    and:

    My understanding is that the copay and deductible situation is even worse than you say it is.

    Using very rough numbers, your out of pocket maximum might be $5000 if you have a low income vs $9000 if you have a middle class income.

    Big deal. Both approaches have deductibles and coinsurance that are too high for millions of Americans.

  6. Increasing the subsidies and/or moving more people into Medicare might be easier said than done. Not to sound hopelessly crass, but where is the funding to come from? One of the primary selling points for the ACA was that it would be “budget neutral.” It was broadly implied, and widely believed, that the costs could be largely extracted from “greedy” insurers and the despised One Percenters. Now it turns out that the plan was to force insurers to become instrumentalities of “budget neutral” revenues, whacking some to fund the expenses of others. Too cute for words. But now you’re talking about increased levels of taxation, or borrowing yet more from the Chinese and Japanese. That’s going to be a “hard sell” indeed.

    I haven’t ventured into the exchanges, but I’m seeing a lot of complaints that the deductible under the Silver plan is about $2,500 a head, with substantial co-pays. I’m also reading that the special subsidies for deductibles and co-pays aren’t available to individuals earning over $25,000 a year. I doubt we’re going to see a joyous national celebration, once the details become available.

  7. I’m glad to see my blog entry reprinted here has sparked some intelligent discussions. Bob Hertz has an interesting comment that I am going to need to think about some more. To the extent that subsidies insulate individuals from the higher gross premiums, we may see a greater increase in government spending per enrolled person and perhaps a tempered decrease in enrollment among the subsidized population. We might also see people who are subsidized moving from the higher metal tiers (gold, platinum) into the silver one.

  8. Mathematically, the persons who get subsidies should not be harmed much even if every single enrollee was old or unhealthy. That is because for at least the next 2 years, thei obligation for a person in subsidy land is a per cent of income, i.e. 4-9 per cent depending on total income.

    So even if the premium for a 55 year old soared to $10,000 a year due to a death spiral, a 55 year old who made roughly $40,000 a year would still only have to pay $3600 toward his premium. (roughly) The rest would be subsidy.

    For persons who make over $40,000, look out. They will stay away from the exchanges in droves. The non-exchange individual market may not be too welcoming for them either…..because I believe that carriers have to factor in their experience on the exchanges in order to compute the rates on their non-exchange policies. No more separate risk pools with each carrier.

    This is political doom for the ACA. It cannot survive in its present form if every person making over 400% of poverty is wildly against it.

    One solution of course would be to expand the subsidies to higher incomes.
    That may be the least bad option.

  9. The medical loss ratio of some 85% imposed on insurers under the ACA exposes the frivolity of the claim that the “greed” of insurers is driving increases in costs. This was always Bolshevik claptrap, pure and simple.

    I’ve noted earlier, but it bears repeating, that the heretofore uninsured young and healthy have little incentive to flock to the exchanges. There is no effective mechanism to enforce the “penalty,” other than to withhold tax refunds. Having hoped for “free” health care,” many of them are viewing the “penalty” with great resentment. They will continue to turn up in emergency rooms and obtain treatment for routine illnesses.

  10. “Covered California has decided not to permit those with recently enrolled in underwritten individual health insurance to “uncancel” policies that do not provide Essential Health Benefits”

    At least some sanity in a sea of stupidity.

    Continued increases in premiums over the “30%” for ACA provisions for the “you can keep your plan” will not help people sign up. In NC BCBS announced 16% – 23% additional plan premiums. Add that to hospital concentration of Duke and UNCH systems and there is no hope for price moderation.

    It’s comforting to know the insurance/hospital industry thinks we have limitless access to funds for health care.

  11. Insurers will tell you that they need a pool with an average age of about 40 to make the numbers work. People in their early 60’s use 5-7 times ore healthcare than those in their 20’s but they can only be charged up to 3 times more. Of the 7 million people the Obama administration hoped would sign up for insurance through the exchanges, 40% need to be young people to ensure affordability.

  12. I understand the message of the blog entry is that younger/healthier people are not and need to sign up to make the system work. However, a question that comes to mind is what percentage of the individual market now is in each age group and what percentage of these groups have signed up? I mean, it seems to me that the percentage of the individual market is always skewed to older people, as they need and/or perceive they need and have more means to buy insurance. So the next question is to look at the percentage of each group that is signing up as a percentage of how they are represented in the current market. If even the groups that already represent more of the individual market are not signing up proportionately, then that even goes more to the problem.

  13. Wow, I guess Californian families will be discussing en mass about Obamacare, what with the press by Mr Obama at his site asking Americans to make it THE conversation over Turkey and Ham .

    He even offers talking points on page 3 of his 4 page literal talking points directive. This is what desperation does. And, ups the ante what comes next WHEN this fails.

    People worry about who and how many are enrolling, but just wait until you see who will, or rather who won’t be participating in the law. And I am talking about providers!

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