The Uninsured Are Not Signing Up for Obamacare

In my last post, I asked, “But what if most of the uninsured literally don’t buy Obamacare?”

“Only 11% of consumers who bought new coverage under the law were previously uninsured,” according to a survey of 4,563 consumers eligible for the health insurance exchanges done by McKinsey & Company and reported in Saturday’s Wall Street Journal.

The Journal reports that “insurers, brokers, and consultants estimate at least two-thirds” of the 2.2 million people who have so far signed up in the new exchanges are coming from those who already had coverage.

This is consistent with anecdotal reports from insurers I have talked to that are seeing very little net growth in their overall individual and small group markets as of January 1.

That’s even worse than I thought it would be even considering the January 1 individual policy cancellations and small group renewals that are driving employers to reconsider offering coverage––and that is saying something. The vast majority of the individual cancellations, particularly because of the early renewal and extension programs, are yet to come. The same can be said for the small group renewals.

This also tells us why the first three months of the Obamacare enrollment had a relatively high average age––they came from the same market that tended to skew older that the health plans already covered.

When McKinsey asked why subsidy eligible people weren’t buying, 52% cited affordability as the reason. Readers of this blog will know that I’m not shocked to hear that given what I have been writing about the high after-tax premiums, net of the subsidies, people are finding, as well as the high deductibles and narrow provider networks the subsidized Silver and lowest cost Bronze exchange plans are offering people.

Another 30% cited “technical challenges” with the website as reasons they have not yet bought. That said, enrollment in the state exchanges that have generally been running well––California, Washington state, New York, Connecticut, Kentucky, and Colorado are also only enrolling a very small number of people relative to the number of policy cancellations in their markets and the size of their uninsured population.

Private exchange Health Markets reports that of the 7,500 people it has enrolled, 65% had prior coverage.

At Michigan’s Priority Health about 25% of their new exchange customers came over from employer coverage and 50% from the individual market––leaving only 25% to come from the ranks of the uninsured.

I will suggest that the significant number of the new enrollees coming over from discontinued employer coverage should be troubling to Democrats. While low paid workers might fare better in the exchanges, many of those eligible for federal subsidies, particularly in two-income families, will fare far worse compared to the plan their employer offered them.

Creating a circumstance that forces people to lose their employer coverage is not going to be a political win.

The WSJ also reported that Michigan insurers expected a total of 400,000 new exchange enrollments out of the 1.2 million uninsured but so far have signed-up only 76,000 people, “many of whom were previously insured.”

If this keeps up there won’t be a “death spiral.” Heck, so far the insurers are just re-enrolling their old customers at higher rates!

In addition, many of the 2.2 million exchange enrollees have not yet paid their premiums. The carriers I talked to at the end of last week report that anywhere from a low of 70% to a high of 85% of new enrollees have paid so far. Some of the health plans have closed their books on January and some are willing to take premium until the end of the month. It would appear there will be an overall 10% to 20% final attrition rate due to non-payment of premium.

However many finally pay, so far it is clear that the uninsured just aren’t buying Obamacare.

If this continues, people will be asking a very big question come election day:

While we needed to do health insurance reform, why did we have to do it in a way that so disrupted the existing individual and small group market if the people it was supposed to benefit, the uninsured, weren’t going to be buying it?

The Obama administration will now argue they had lots of computer problems between October and January and there are three months remaining to get people interested in and purchasing health insurance.

They are right.

But when the spin is over, they have to be sweating bullets.

Robert Laszewski has been a fixture in Washington health policy circles for the better part of three decades. He currently serves as the president of Health Policy and Strategy Associates of Alexandria, Virginia. You can read more of his thoughtful analysis of healthcare industry trends at The Health Policy and Marketplace Blog, where this post first appeared.

8 replies »

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  2. After doing research (without signing up for healtchare gov.), I found it would cost me $385 a month, with $3K deductible. SERIOUSLY? No way. Sue me.

  3. I think it’s still a big sell for the uninsured and will take a few years to gain some traction. Until the working poor know their jobs are safe they’ll be saving every dollar they can and avoiding any luxuries. Yes, many will still see paying for cover as a luxury vs. food, a roof and a small reserve just in case.

    Also, the penalties are very small so they aren’t really any worse off than they were pre-12/31.

  4. “Doesn’t an employer have to pay a penalty if that employer terminates [its] health plan and sends employees to the exchanges?”

    That requirement — the employer mandate — is for larger employers (those with 50 or more full-time employees), and those employers only have to offer minimum value, affordable coverage to full-time employees and their dependent children up to age 26 to escape the penalty. Back in July 2013 the employer mandate was delayed to 2015.

  5. HIT Geek:

    I think what ACA could have used were people that have very successfully sold a lot of product and services to various demographics as they understand what people will and will not buy at a given price point or at all.

    As for young people – there is simply no horror story that one can tell that will encourage the young uninsured to buy HC en masse. The nature of being young is to feel invincible and for the most part this is true. For the young that might buy it perhaps the cost is too high and when one has no to little assets who cares.

    As for those that were uninsured and not young that still will not buy it one has to figure out why. They don’t care, they work in the all cash sector or it’s too expensive. Whatever the case, until one figures out why they won’t buy it it’s hard to suggest a fix.

    I think ACA’s challenge for many people is that it’s just too expensive. If people can’t afford it then they can’t afford it. What kind of horror story is going to compel someone to spend money they don’t have – month after month after month?

    Admittedly many in this country do buy many goods and services on credit that they really can’t afford. The difference is if they buy that TV or vacation they can tangibly enjoy it. HC is an intangible that one doesn’t appreciate until they need it.

    It’s also important to understand how tight the economy has been since 07-08. Many have way less cash flow than they used to and unemployment is still very high. The fact that BLS sees fit to magically remove the long-term unemployed from the labor pool does not mean that they don’t exist.

    At the end of the day – the architects of ACA’s biggest failing is to not understand human nature/behavior, the poor state of the economy and frankly believing their own marketing a wee bit too much.

  6. Even with subsidies, middle class insurers in the ACA exchanges have to pay 9.5% of their pretax income on health insurance before the subsidies kick in.

    The people who designed this bill were federal and corporate employees, who would be terrified if they had to pay $8000 of their $80,000 incomes on health insurance.

    So the inequality between classes of workers is not relieved very much by the ACA.

    One quick question:

    doesn’t an employer have to pay a penalty if that employer terminates their health plan and sends employees to the exchanges?

    Or is that too on hold?

  7. While I’d hate to see it happen, what we need are a few well-publicized cases of disastrous consequences from being uninsured. Scare ’em with reality, not conjecture.

    The stories that are pre-ACA *should* have served as lessons for now, but they are not being told well or often enough. My guess is that more current post-ACA horror stories might be more effective, especially for younger people who don’t consider what can happen and how dreadfully expensive an acute health care episode can be.

    Higher deductibles and co-pays are part of the post-ACA landscape, though, and they can ruin people who live paycheck-to-paycheck. Medical bills were the cause of ~60% of personal bankruptcies pre-ACA, and I don’t see that declining much in the short term.