The number of people who signed up for health insurance for 2016 on the state and federal exchanges was up to 40% lower than earlier government and private estimates, which some say is evidence that the plans are too expensive and that people would rather pay a penalty than buy them.
In 2010, the non-partisan Rand Corporation estimated 27 million people would have exchange policies this year and the Congressional Budget Office at that time was estimating 21 million for 2016. CBO even said last June that 20 million people would have plans purchased on the exchanges this year. Just 12.7 million signed up for plans, however, by the end of open enrollment Jan. 31 and about 1 million people are expected to drop their plans — or be dropped when they don’t pay their premiums.
“That’s not the only mistake CBO made but it was a really big one,” says Brian Blase, a former aide to the Senate Republican Policy Committee, who is now a senior research fellow at the free-market Mercatus Center, which is funded in part by Charles and David Koch, two industrialists who have long opposed the Affordable Care Act.
Late last month, CBO revised its estimate down to an average of 13 million people a month enrolled on the exchanges this year.
Health and Human Services Secretary Sylvia Burwell last week called the recent enrollment numbers “a success” and it is on track to beat her lowered projection that 10 million people will have paid-for plans at the end of 2016.
The law has led to a drop in the uninsured rate to about 12%, which is down more than 5% since the requirement that people have health insurance took effect in early 2014, according to Gallup. Along with the nearly 13 million who bought plans on the government exchanges, it’s also unclear how many millions of people are buying individual policies through insurance brokers and companies. But concerns remain and the mix of people buying plans on the exchanges.
Both supporters and critics of the law agree that the exchanges need a better balance of low and higher-income people buying insurance as insurers set their rates based on who they expect will purchase plans. If there are more unhealthy people, rates go up and lower income people tend to have more health problems. But higher-income people tend to already be insured too.
The two sides also agree the plans have proven too expensive for many people who make more than 400% of the federal poverty limit ($97,000 for a family of four), making them ineligible subsidies and tax credits to help pay for their insurance. TheCenters for Medicare and Medicaid Services reported last month that just 3% of those buying plans on the federal and state exchanges earned more than this amount. The Urban Institute, a research nonprofit that does work for state and federal government as well as foundations, estimated last year that 25% of exchange customers would earn more than 400% of the poverty limit.
Reasons why supporters say enrollment is lower than the original projections include:
• The process hasn’t completely recovered from the disastrous rollout of the federalHealthcare.gov website in the fall of 2013, says Matthew Buettgens, a senior research associate with the Urban Institute.
• CBO expected a lot more employers to drop their plans and send workers to the exchanges for their coverage, notes Katherine Hempstead, director of the insurance coverage team at the Robert Wood Johnson Foundation. That hasn’t happened, however.
• CBO also thought more people who didn’t get subsidies would still buy on the exchanges, but several million are believed to buy direct from insurers or brokers. While that affects the overall enrollment numbers for the exchanges, Hempstead says, it also means these people are still getting better plans with ACA’s protections, including a prohibition against discriminating with preexisting conditions.
Critics say signups were slower than expected because having insurance may not be as important to people as the administration thought it would be, given other financial needs. And it’s often cheaper to pay the penalty and pay cash for health care, insurance brokers say. That’s unless people are eligible for subsidized coverage.
Young, healthy people in particular don’t feel like they should have to pay for benefits the plans have to cover, such as mental health and maternity care, says Sam Gibbs, executive director of AgileHealthInsurance.com, a private insurance exchange. Nearly half of the firm’s clients are in this bracket and purchased insurance plans that don’t meet the ACA but will protect them in the event of a serious injury or illness. They will pay the tax penalty and still save money, Gibbs say.
Donald Kirkendall, an insurance broker in Orlando, Fla., was paying $247 a month for a Cigna plan two years ago, but after that premium increased too much, he switched to an Aetna plan that got canceled because it didn’t comply with the ACA. The Humana plan he switched to just increased to $697 a month.
“Who can afford that?” he asks. “And I do this for a living.”
One of the two insurers in Alaska was told late last month that it couldn’t sell or renew plans any more in the state due to its precarious financial situation, but Moda Health got a reprieve last week and can now sell through 2016. Insurance broker Trish Mack, who is based in Anchorage, says she has had at least a dozen clients who weren’t eligible for subsidies come in to enroll in insurance but decide to pay the penalty instead of for insurance.
CMS has already made some changes to address insurers concerns, most notably by reducing the number of special enrollment periods when people can sign up for plans. Insurers have complained they wound up with too many sick people because the administration allowed too many people to sign up during the year — and some waited until they were sick and dropped coverage later.
Christopher Condeluci, who helped draft the law as a Senate Finance Committee Republican aide and supports aspects of it, says it’s a problem that “three years into the law’s implementation, the market is not stabilized.” Condeluci, an attorney who is now a principal in CC Law & Policy, says insurers need more flexibility to offer plans that are affordable and cover only what people really need.
Possible changes by a Democratic administration or on Capitol Hill “might be too little too late, ” Condeluci adds, and he doubts congressional Democrats would want to take a chance opening the law up for debate again. Republicans, he says, would just as soon repeal it and replace it with something that gave insurers more flexibility to offer lower-priced plans with fewer benefits.
But Buettgens says that with 12.7 million signups, which reduced the uninsured rate to below what it was before the ACA, “it’s difficult to call that a failure.” Besides, he notes, insurers are just beginning to understand this new market and “have very little actual claims experience.”
“Various projections were higher than that, but there’s been steady growth,” he says. “It’s much too early to be making definitive statements about the future of the marketplace.”
CBO was also wrong on another key projection: It said the health law would cost $142 billion over 10 years, but it revised those estimates down by 11% last year.