Why the January 1st Deadline Matters

Contrary to the views of some, the number of people who have insurance coverage through the Exchanges as of January 1, 2014, matters to everyone.  It matters because the pool that exists on that date will determine, at least for a while, whether the premiums charged by insurers in the Exchange are likely to be stable and the extent of the federal government’s multiple obligations to subsidize plans purchased on the various Exchanges. It is not as if insurers get a claims paying holiday simply because more and healthier people may enroll later in the year.

It also matters because a major point of the Affordable Care Act was to increase in an efficient and relatively painless way the net number of people who have insurance or social protection against significant illness.  If the numbers in the Exchanges and in the expanded Medicaid program do not way more than offset the number of persons who lose their insurance as a result of the ACA, or if the cost of extending health protection in this fashion proves too high, the ACA will not have accomplished its goals.

Given the chaos that has erupted as procrastination strains Exchange infrastructure and deadlines are repeatedly extended, it is difficult to tell right now whether the ACA is performing as hoped. A few things are clear, however. The first thing is that the Obama administration is not releasing the sort of information from which an objective assessment could be made.

Platitudes such as “Millions of Americans, despite the problems with the website, are now poised to be covered by quality affordable health insurance come New Year’s Day,” from President Obama at his last press conference are just not a substitute for knowing how many people have enrolled in the plans in the various Exchanges, and more importantly, have paid for coverage. What are their ages? How about some real numbers as a Holiday present?

Second, the Obama administration is acting as if a large number of enrollees in the aggregate is the measure of success. This is simply not true. Putting aside the problem of it being paying customers rather than mere enrollment that ultimately matters, meeting or exceeding projections in some states does not compensate for deficiencies in many other states.

Because the pools are state-based, Texas insurers and insureds are not helped if enrollment in New York or Connecticut exchanges ultimately equals or exceeds targets. The insurance market in Texas and many other states will still be unstable with some insurers likely pressing for significant premium increases, contemplating withdrawal from the Exchanges, and demanding larger subsidies from the federal government via Risk Corridors and other programs.

Third, even those who have been on the more pessimistic side of matters, must acknowledge that there has indeed been a surge in many state Exchanges and in many states covered by the federal Exchange. On December 11, I wrote: “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.”

With enrollments at 17,000 per day, California may in fact be there. Colorado, which previously had dismal enrollment numbers, reports 33,356 enrolled as of Monday, which puts it at of the 136,000 projected enrollment for 2014 and 52% of the way towards the Obama administration’s projections for this time of the open enrollment season. (33356/(0.47 x 136000)). Other states such as New York and Connecticut, which previously were doing better than most, have also reported a high pace of enrollment.

Whether that surge has been as large in many other states remains to be seen. Proponents of the ACA like to cherry pick their states with at least as much zest as opponents do. Perhaps both sides share the belief that insurance enrollment is at least much a social phenomenon as a purely economic one. Numbers for large states (with large numbers of uninsureds) such as Texas, Florida, Georgia, Indiana,  Illinois, North Carolina and Florida have yet to report any numbers that I have seen.

And, as mentioned above, even if California and New York and some other states have enrollment sufficient to forestall premium instability and possible entrance into an adverse selection death spiral, that will not greatly help states in which enrollment ends up being less than half of that projected.

Finally, we need to look beyond the last minute holiday rush for health coverage and see what happens between now and March 31, 2014. The carrot of the ACA has basically been eaten for 2014.  If you wanted health care coverage and could afford the prices on the Exchange it made little sense to wait until after the December deadline to acquire it.  This is all the more true given that the President has permitted people to game the system by simply enrolling in a plan now and deciding until January 10, 2014, whether to pay.

Now, however, the first surge is likely over.  Will there be the needed second surge? All that really remains is the stick: the individual mandate tax penalty.  Many people, including me, believe that even before the events of last week, it was too small in 2014 to achieve its goal of inducing enrollment by those in good or average health.

The number of people for whom insurance would not be a good deal at, say, $2,000 a year net but for whom it would be a good deal at (effectively) $1,705 per year ($2,000 – the $295 per person tax penalty) is not likely to be enormous. This is so because ACA premiums often depart greatly from actuarial risk by their prohibition on medical underwriting, accurate age rating, gender rating and their — shall we say — loose enforcement of tobacco rating.

Moreover, with the administration exempting last week upwards of half a million people from the individual mandate, the number of people who need fear the stick got even smaller.  So, yes there are mega-procrastinators or people who have been stymied by the dysfunctionality of various Exchange website in obtaining coverage. There are former skeptics who see their neighbors helped by health insurance coverage under the ACA and who now enroll just as there may be some turned off by whatever problems emerge in administration of the plans.

On balance, I would not be surprised to see modest increases in enrollment between now and the middle of March.  I remain highly skeptical, however, that there will be a second surge equivalent to what has occurred this past week.  As they say, however, only time will tell.

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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37 replies »

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  2. BC, I’m no fan of the inequality of income distribution of Mexico and do agree that much of its problems have been its own doing. That does not mean the U.S. has no influence on their economy, just the opposite, when so many are on the edge economic policy has a huge effect.

    As to income inequality it’s interesting you bring up Mexico and the U.S. in the same sentence. The U.S. ranks at the bottom, with Mexico, in income inequality as per the OECD. The widening divide between rich and poor here is a looming threat to our own stability.

    The U.S. is also down there with Mexico in poverty levels when measured as percentage living with less than median equivalised household income.

  3. Peter:

    Mexico’s problem is its hangover from Spanish imperialism something that plagues most of Latin America.

    Mexico is a wealthy country it’s just that the class system keeps people fixed at their station in life and people like Slim greedily sucking up as much for themselves as possible doesn’t help.

    This has zero to do with the US.

  4. But let me assure my liberal friends that I am not greatly offended by insinuations that I am an unlettered, amoral, niggardly, racist, “born-again fundie” with a microchip implanted in my skull by Karl Rove. Having once been a liberal, I am familiar with their thought processes, and know that most of them will eventually find their way to the light.

  5. Bob – I’ve said several times before that politicians at both the state and federal level are reluctant to spend a large sum of money to insure a comparatively small population of very sick people many of whom are too sick to even vote. State and local governments spend a lot of money for health insurance for both their employees and retirees because they have to as part of their labor agreements.

    I think the federal high risk pools were recently extended until the end of January 2014. By the way, the maximum age rating band for those was 4 to 1 as compared to 3 to 1 for the ACA exchange policies. I don’t know why there is a difference other than because the people in the high risk pools don’t constitute either a large or politically powerful constituency.

  6. Barry, of the 35 high risk pools that existed in 2011, 16 of them had less than 3,000 enrollees. (per Kaiser)

    MN and Wisc had over 25,000 enrollees each.

    Beats me why state legislators cannot write checks for these pools. The Obama administration cut off funding for its high risk pool even before the exchanges were open.

    The same legislators spend billions on health insurance for state and federal employees. Seems like a contagious stinginess applies to high risk pools.

  7. I think the bigger problem in Louisiana is that the Cajun culture never placed much value in education. The same is true, by the way, of the Appalachian culture especially in the more rural areas. I remember the line from the movie “Coal Miner’s Daughter,” which was “There’s only three things to do in these parts – coal mine, moonshine or movin on down the line.” You don’t need much education for those options.

  8. Actually, Barry, it’s about 90% work ethic and judicious governance. Louisiana is blessed with abundant energy resources, but who would want to try to run a business there?

    Howard Dean on Fox News Sunday: “The data does show that less healthy people are signing up; younger people are signing up less frequently than hoped.” (Howard Dean Agrees. . ., Andrew Stiles, NRO, 12-29-13)

    Dean also says the insurers, not Obama, will be blamed if exchange insureds find themselves unable to see their preferred doctors (Dean: Administration Won’t Be Blamed If People Can’t See Their Doctors, Ben Wolfgang, Washington Times, 12-29-13.)

  9. States with income taxes beat Texas. Overall what does that tell you.

    Texas, 22% without health insurance, poverty rate 11th highest, highest rate of uninsured children, elderly and unemployed. 30% under 65 uninsured, after which by the way Medicare takes over.

    So much to be proud of. Please, keep Perry where he is, Texans deserve him.

    “Obviously, some contractor was using the hospital emergency room to evade his obligations under the Workers Compensation Law.”

    Why doesn’t Texas crack down on employers? Too many political contributions? It also holds down employer workman’s comp. rate$.

  10. Bob — Prior to the ACA, 35 states plus the District of Columbia had high risk pools which insured a total of 200,000 people or so. Premiums were high and coverage wasn’t very good with benefits often capped at a comparatively low level like $75K for a single year. The medical cost ratio, on average was 250%-300% which means insurance premiums covered only 33%-40% of total medical claims. The rest was paid for, depending on the state, by a combination of surcharges on insurance companies and general state tax revenue. Other estimates I’ve seen suggest that roughly 4-5 million people in America below age 65 and not eligible for Medicaid are uninsurable under traditional medical underwriting standards.

    archon41 – While Texas likes to brag about its business friendly regulatory environment and its lack of a state income tax, it’s important to note that it derives a significant portion of its revenue from severance taxes on the energy industry which are built into the price of energy and paid by everyone across the country. Along with Wyoming and, more recently, North Dakota, they are beneficiaries of an accident of geography related to the location of energy resources. Moreover, when energy prices crashed in the early 1980’s, Texas went through a severe recession / depression including a housing bust. Its business friendly regulatory environment and lack of a state income tax didn’t help protect it from that economic downturn. When the industry that drives your local economy goes into the crapper, it overwhelms everything else including your tax structure.

    It’s also useful to point out that wealthier retirees are attracted to states that do not have a state level estate tax or inheritance tax. Many of those are in the south. Housing costs tend to be cheaper as well because land is plentiful, the permitting process is cheaper, faster and easier than in the Northeast and along the Pacific coast and areas with large concentrations of retirees enjoy much lower property taxes because a relatively small percentage of the local residents have children in school which greatly reduces the cost per household of supporting the local school system.

  11. The high-taxing, closed-union-shop states really ought to get a restraining order against this odious fellow Perry, to prevent him from stealing any more of their lucrative businesses. Almost makes me feel guilty about the 5% rate of unemployment in my area, with no state income tax. I haven’t noticed anyone expiring in the street, for want of medical care. I’ll tell you one thing I recently saw, though: five men, in their 20’s and 30’s, dressed as workmen, ahead of me in an emergency room waiting line. Each claimed to speak no English, and to possess no identification documents. They were accompanied by a bilingual “navigator,” who explained their needs to the nurse. Obviously, some contractor was using the hospital emergency room to evade his obligations under the Workers Compensation Law.

  12. “I totally share your anger about the cutoff of subsidies”

    Bob don’t assume moral anger by #41. He enjoys pocking us “liberals” in the eye as entertaining fun.

  13. “a law which covertly imposes the costs of caring for the uninsured upon those earning as little as $46,000 a year. This is fraud, pure and simple.”

    I guess then your “moral outrage” would support a tax on upper incomes to accomplish the, “costs of caring for the uninsured”?

  14. I was not in jest about states keeping taxes low in order to attract retirees.
    Among many, many articles on this, see “Low Tax states prove that less is really more”, by Hannah Sell.

    Also, the Tenn Care program (which expanded Medicaid in one state) began to lose all legislative support when it appeared to necessitate the creation of a state income tax.

    Now as for opposition to Obamacare:

    I totally share your anger about the cutoff of subsidies, and how that creates indefensible costs for some. Within the ACA it is totally possible for a couple in their late 50’s making $63,000 a year to be faced with an insurance premium of $18,000 a year for decent coverage. That is over 30% of their after tax income.

    However — before Obamacare, numerous states had high risk pools to help the uninsured. And most of the southern states refused to fund these pools with any general revenue. I could look it up, but only about 15 states nationwide had high risk pools without long waiting lists due to underfunding.

    My point is this:

    the anti tax states will oppose any new taxes for health care, whether these taxes are proposed by Obama or their own Republican governors.

  15. Missouri Bill Would Gut Obamacare, Michael Boldin, Washington Times, 12-27-13.

    My liberal friends embarrass themselves with the claim that only “racism” and detestation of “the poor” can explain opposition to a law which covertly imposes the costs of caring for the uninsured upon those earning as little as $46,000 a year. This is fraud, pure and simple.

  16. No, Bob, the Great American Worker was squeezed out of construction many years prior to Katrina. You just weren’t paying attention.

    Attract Northern retirees? You jest.

  17. They won’t be “illegal” for long, if Peter has his way, and they will be most grateful to their patron, the Democratic Party.

  18. We are getting off the ACA track here, but that is OK.

    Let me clarify.

    The opposition of white southerners to federal welfare programs is documented in every single history of the New Deal. Southern Congressmen opposed Medicare in 1965 because it called for integration within hospitals.

    Since 1965 the opposition may have been less explicitly racist. Southern states generally have low state taxes or no state income taxes at all.
    They want to keep it that way in order to attract corporations as well as well-off retirees from the North.

    In the poorer southern states, the federal government has always paid 80-90 per cent of Medicaid costs. And yet there was opposition to even paying the 10 percent that was left to the states.

    I do not know how else to explain such opposition other than hard-core fiscal conservatism and racism.


    Archon41 raises a good point about the use of immigrants in the building trades. This became very common right after Hurricane Katrina, when immigrants were brought in at low wages even while the government and insurers were paying high costs for rebuilding.

    This was sure as heck not approved by me or my ilk! It drew a lot of protests from unions. It happened in large part because the Bush Administration turned a blind eye to what the greedy contractors were doing. I assume this blind eye was due to their ‘right to work’ ideology and distaste for unions

  19. We don’t prosecute employers, the political back-scratchers, we only target the struggling “foreigners”. If you want to stop latinos “taking” our ready-to-work-at-anything-for-anything citizens then just boycott fruits and vegetables, let alone construction.

  20. ““In general” not your usual level of evidence.”


    I will also speak to the problem of tax incentives which reward wealthy corporations for something they would do anyway and which take money from local education and services. Here in NC, local and state governments have just given millions to Walmart to establish a regional distribution center paying low wages. Our county won’t see any property tax for 10 years, the land is being purchased by the local city and the DOT is building the access roads for free. County employees have not had a raise in 6 years as they (with other government employees) have become the whipping boy of economic blame.

    Our last “incentive”, which also paid a multi-billion dollar “Sheetz” corporation with incentives, and a 7 year property tax holiday to create jobs paying just over the federal poverty level for a family of four.

    It’s also a fact that southern states have legislated so-called “right-to-work” laws which make union organizing extremely difficult and mostly unsuccessful. Couple that with lower educational spending per student in the south and you can see how they really do “despise” the poor of their own making.

  21. Very out of character for you, Bob. “In general” not your usual level of evidence.

  22. Um, hmm, and you guys so love the jobless poor that you have allowed non-citizens to establish a virtual monopoly of the building trades. Many an American family flourished through skills in framing, concrete pouring, roofing, flooring, carpentry, tile setting, painting, etc.–but no more. That world is now closed to them, while they cry out for unemployment benefits. Would anyone be so impudent as to propose that these occupations are beneath the dignity of the Great American Worker? And your “comeback”? American businessmen hired these foreigners, so there. Behind this insincerity the truth is clearly visible: You are pandering for ethnic votes. So, please, desist from moral posturing in my presence.

  23. The southern states in general despise the poor people in their midst, and would never put their welfare ahead of getting a good shot at the federal government.

  24. Looks like the “Unteachables” in the South Carolina Senate are primed to pass a law obstructing Obamacare. Maybe the tourists should be cleared from Fort Sumter.

  25. Yes. Peter, the entire private sector is collapsing, crushing all beneath it, just as Karl predicted. Keep your “Property Is Theft!” signs ready.

  26. The failure of a private insurance based model for health care. It will eventually fail the group market as well. Cost controls here in U.S. are all about patient takeaways while providers and insurance get to just roll along in ever increasing dollars.

  27. The omens are not auspicious, to say the least of it. This could easily, however, end as a great “to do” about nothing. Even if the exchange loss experience proves disastrous, the major players can’t get hurt too badly, since the individual market is so small, and “back stops” are in place. Their bread and butter is group insurance. No longer facing credible threats of “single payer” and “public option,” they will start to withdraw from the exchanges, presumably leaving their policyholders as they found them. In “response to popular demand,” both the individual and employer mandates will be indefinitely rolled back, and eventually repealed. Perhaps then serious attempts will be made to address the costs of health care. One can hope.