THCB

November’s Numbers: Sorry. They’re Not Good. They’re Bad. Awful, Actually ..

The federal government announced yesterday that 137,204 people have selected a healthcare plan through the federal Exchange as of November 30, 2013. The number is an increase over the 29,794 who had done so by the end of October, a month during which the website portal for enrollment, healthcare.gov, was in disarray.

The government reports that 258,497 have now selected a plan through one of the state Exchanges, making a total of 364,682 enrolled. Asked by reporters whether the Obama administration stands by its estimate that 7 million will enroll in individual plans sold on the various Exchanges by March 31, 2013, the day necessary to do so in order to avoid a tax penalty,  Michael Hash, director of the office of health reform in the federal Health and Human Services Department, said that they were “on track, and we will reach the total that we thought.”

The pace of enrollment announced by the federal government today is inconsistent with the claim that its 7 million goal will be achieved. The claim rests on hopes of two surges, one taking place over the next 12 days before the December 23, 2013, deadline for coverage starting January 1, 2014 and a second surge taking place as we approach the end of March at which point, if coverage has not been obtained, many Americans will be hit with a tax penalty.

The magnitude of the surge required strains credulity.  A scenario in which most of  those who wanted coverage have already applied and in which the pace of enrollment stays the same or even sags for lengthy periods as we go forward would appear almost as likely. Plus, it seems unlikely that there will be major enrollment between December 23, 2013, the first deadline, and March 23, 2014, the second deadline. If someone wanted coverage, they would try to get it earlier. What does applying in the middle of February accomplish? Moreover, if, given the unpredictability of human behavior, the surge actually materialized, it might well strain the government’s computer systems.

Analysis

There are many disturbing aspects to today’s release of numbers. First, forget for the moment about the March 2014 projection date and the March deadline.  There are only 12 shopping days left before the pool will be closed for those who will have coverage as of January 1, 2014.  Even if the pace of enrollment surges by a factor of 10 over what it was for the last two weeks on which we have data and healthcare.gov enrolls people at 45,000 per day, that would still put only about 668,000 persons enrolled through the federal Exchange as of that deadline.  Even this rather cheery estimate would result in only 14% of the 4.8 million the Obama administration has projected will be enrolling in the federal Exchanges in 2014.  The original projections for enrollment on opening day, January 1, 2014, were considerably higher, 3.3 million.

The number enrolled as of December 23, 2014, matters greatly. While of  course there could be a second surge, in the mean time insurers are having to pay claims for three months on those first 14% to enroll. The initial enrollees are very likely to be comprised disproportionately of people with above average health care expenses. The result will be that, until that prayed-for second surge occurs, insurers will likely be losing large sums of money in the Exchanges and, ultimately, seeking reimbursement pursuant to the Risk Corridors program from the federal government and, derivatively, taxpayers.

Moreover, the aggregate numbers mask the fact that there are 50 different sets of Exchanges. While numbers are better in some, there are many jurisdictions in which there are huge problems.  It is not “OK” if the Exchanges succeed in California, New York and a few other states if insurers and insureds in many other states suffer severe adverse selection problems that result in rapidly rising prices or reductions in availability.

Let’s look at a few states. I start with Texas. There, out of 780,959 projected to be enrolled, there are 14,038 as of the end of November.  This is fewer than 2% of the ultimate projected amount.  Even if one assumes that enrollments in Texas surge to go 20 times faster in December than they did in November, which is a pretty heroic assumption, this would still result in only 183,425 being enrolled as of the December 23 deadline. This would be  only 23% of what needs to occur. It would be as if a football team were down 35-3 in the 3rd quarter and hoping to make a comeback. It could, I suppose, happen, and you shouldn’t turn off the TV set, but the probabilities are remote.

One might argue that Texas is an exceptional case due to the degree of hostility prevailing among many here about “Obamacare.” Take another fairly large state using the federal Exchange, Pennsylvania. There, we see 11,788 enrolled out of 268,858 ultimately projected, just 4.4%.  To get to even 1/3 of the ultimate projected number being enrolled by December 23, the pace for December would have to be 6 times greater than it was in the last two weeks of November. Not impossible given procrastination, but again, a major challenge.

The figures when one looks to the various state Exchanges are a mixed bag. The poster child for the Obama administration would appear to be California. It has 107,087 of the 691,016 it ultimately hopes to enroll, over 15%.  With a decent last minute kick, it is not unimaginable that California could make 1/3 of its total by the December 23, 2013 deadline and get closer to its ultimate goal by the end of March.  But even with these better-than-average numbers, there is the risk of at least some adverse selection in a pool substantially smaller than projected. Also doing better than many is New York. There, we see 45,513 enrolled. But even this is but 11% of the 411,304 projected. It will again take a major surge over the next 12 days if New York were to get to even 1/4 of the ultimate projected enrollment by the December 23 first deadline.

But for every California or New York running its own show, there is an Oregon or a Maryland. These are large states in which enrollment is lagging. In Oregon, owing substantially to the collapse of its computer system, only 44 people have enrolled in plans on their Exchange. It will take an unimaginable surge there to make the system functional. Officials there and in Washington, D.C. will soon need to start contemplating what to do about a failed system; will, for example, tax penalties be imposed for those in Oregon who do not have health care coverage? In Maryland, where the director of the program recently quit, just 3,758 have enrolled out of 91,528 projected, just 4.1%. It goes beyond hope and into the realm of fantasy to believe that Maryland is not going to have a serious adverse selection problem starting January 1, 2014, when those 3,758 who penetrated the state’s application system start filing claims.

Finally, nowhere in the release do I see an age distribution of those enrolling. Unquestionably, the administration has this information. It is required in the enrollment process. And, perhaps this is a bit cynical, but I have to think that if those numbers looked good, if the hoped-for proportion of younger persons were enrolling, the Obama administration would release the information.  I believe we are entitled to draw a negative inference from the fact that the information was not released that the pool is disproportionately elderly. If this is correct, what we are seeing is a small pool composed disproportionately of the elderly. That does not augur well for those who want to see the promises of the Affordable Care Act fulfilled.

An Experiment

HHS was kind enough to include a graphic in their report. Here it is.

Cumulative enrollment in the federal Exchange for various states

Cumulative enrollment in the federal Exchange for various states

The graphic plots time on the x-axis and cumulative enrollment on the y-axis. Recognizing all the enormous problems with doing so, I thought it would still be interesting to try to fit a curve to the data and extrapolate it out to see where we might end up.

The short version is that if we extrapolate the curve using quadratic and cubic models, we end up at between 278,000 to 383,000 enrolled in the federal system by the December 23, 2013 first deadline. This would represent fewer than 10% of the ultimate projected enrollment and will create substantial adverse selection problems for at least the first three months of the program, particularly in the less enthusiastic states. This all assumes, of course, that all people who have selected a plan actually pay the premiums. The numbers could be worse. Regardless, insurers are going to be very concerned if these are the sort of numbers that materialize; the federal government better get out its Risk Corridors checkbook to help relieve the pain.

By March 23, 2013, however, the same models show we could be at 1.35 million to 3.94 million, depending on the model chosen.   This would represent 28% to 82% of that originally projected and would cause serious adverse selection problems at 28% or mild adverse selection problems at 82%.  I appreciate fully that these are large error bars but we just don’t have the data or an a priori model that permits me to extrapolate with any confidence this far into the future.

Here’s a graphic showing these results.  The Mathematica notebook that generated them has been placed here on Dropbox.

Extrapolation of enrollment data

Extrapolation of enrollment data

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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Bob HertzPeter1Matthew HoltSeth ChandlerOn Your Feet Recent comment authors
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Bob Hertz
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Bob Hertz

As Matthew notes, a default public option would break a cardinal rule in Washington —

i.e. keep the costs off budget

Make people pay premiums and blame the insurance companies…but don’t make them pay taxes.

Route health care dollars through insurance companies, rather than through Washington.

Even the subsidies in the ACA are called ‘tax credits’, so as not to look quite so much like federal spending.

And if the Repubs were dead set against a public option, some of them might have supported a straightforward voucher.

Peter1
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Peter1

The upside for low enrollment is more “tax/penalty” dollars. Which will help fund the “other” guys insurance.

archon41
Guest

“I didn’t build that,” he said, irritably fingering his Chesterfield. “These Tea Party yahoos blocked the plan I really wanted. So stop calling it ‘Obamacare'”

Matthew Holt
Guest

So why not automatic enrollment in a public option as a catchall instead of this grinding exchange mess in private plans? Oh wait…I remember there was a reason….Welcome to America!

archon41
Guest

Not to be tiresome about it, but: “Less than three in ten uninsured Millennials say they will definitely or probably enroll in insurance through an exchange if and when they are eligible.” (Obamacare Underwater with Collegians, Accuracy in Academia, Malcolm Kline, 12-9-13, quoting from Harvard Institute of Politics report.)

Maybe they need to get Kanye West in here.

archon41
Guest

Lady Gaga, maybe? I mean, we don’t want to erect a top-heavy structure on an unstable foundation, do we?

Kinda like a wake in here.

archon41
Guest

Looks like some hospitals are now acting as “navigators” for some of their patients. Parkland Memorial, in Dallas, is helping more than 100 a day get signed up. (Obamacare: An Uneven Playing Field for Hospitals, Berta Coombs, CNBC, 12-19-13.) That should speed up the enrollment process. It’s still unclear whether they will be permitted to pay the premiums for these patients, presumably the chronically ill.

Has anyone come across a reasonably intelligible discussion of how the ACA will affect rating and premium calculation for small employers?

Seth Chandler
Guest

@sribe — I agree the curve will not be smooth. But a smooth curve could approximate bumps and jumps created by things such as holidays and intermediate deadlines, such as those occurring on the 23rd of every month. I was using these as very imperfect order-of-magnitude estimates. I am wondering, though, what is the basis for your belief that early sign ups will not be dominated by the elderly and the sick. On the elderly, we already have data indicating disproportionate enrollment by those over 50 and disproportionate non-enrollment by the Young Invincibles. On the “sick,” we don’t have the… Read more »

sribe
Guest
sribe

Your curve fitting is not what I meant when I said “based on unfounded (and extremely pessimistic) assumptions.” I was referring to your assumption that early sign-ups will be dominated so heavily by the elderly and sick.

Also, I find it highly unlikely that the actual sign up rate is going to follow a smooth curve. It is much more reasonable to expect a surge that will not fit a simple quadratic or cubic fit. Now, how bit that surge will be, I have no idea. But the curve-fitting makes assumptions about consumer behavior that are almost certainly dead wrong.

Seth Chandler
Guest

@sribe — Thanks for thinking about what I have written. And I agree that my curve fitting experiment has many issues. I would not pretend otherwise. But I disagree that I am being “pessimistic” or at least unduly pessimistic. Indeed, a strong case can be made that my quadratic and cubic extrapolations are extremely optimistic. A quadratic model assumes that the rate of enrollment — note, not enrollment, but the rate of enrollment per day — will continue to grow for the remainder of the entire period at a linear rate (quadratic model). The cubic model assumes that the rate… Read more »

On Your Feet
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Would 1.35 million be enough people enrolled for this to work?

Dr. Rick Lippin
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Dr. Rick Lippin

It doesn’t matter what medical speciality you are practicing today- if you are not engaged with both individual and institutional prevention (or better yet have an MPH degree) you are not relevant to the future of medicine.

Perry
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Perry

archon41,
Yes and I’m probably a racist too, because I’m not an Obamacare supporter.

archon41
Guest

Not sure it makes much difference, given the gender indecisive nature of today’s youth.

Just heard this, on one of the new Obamacare ads: “Don’t stand and diddle on your healthcare shizzle.” Kinda catchy, no?

Perry
Guest
Perry

How about the sexiest woman?

archon41
Guest

That’s sexist.

Little Timmy, for the next few weeks, is going to be a very busy lad. He will be trotted out repeatedly to illustrate how, under the ACA, he will now be afforded (or, as the case may be, denied) the health care he so desperately needs.

archon41
Guest

Just read that the “sexiest man alive” (forget his name) will be rolled out tomorrow to trill the virtues of Obamacare to America’s youth.

sribe
Guest
sribe

All the math and curve fitting in the world will not turn an analysis from one that is based on unfounded (extremely pessimistic) assumptions into one with a solid foundation…