Obamacare Enrollments Show Low Uptake by Uninsured, Hoisting Insurers on Their Own Petard

One of the few saving graces is that the health insurers’ scheme to enrich themselves known as Obamacare may be going pear-shaped from the standpoint of their profits.

First we had the mess of the Healthcare.gov website, and recall that fixing the back end was lower priority than improving the much-higher-profile consumer experience. So insurers had to process a lot of completed applications manually, which imposed unexpected costs on them. Second, many of the initial enrollees (and presumably a not-trivial proportion of the later ones) were assumed to have pre-existing conditions, as in have costly ailments that had gotten them denied. While insurers did expect to have that population sign up, they didn’t plan on them being vastly more enthusiastic about Obamacare than other target populations, since it would create an significant adverse skew in the insured population, potentially leading to a death spiral (in general, if an insurance pool does not have enough good risks to compensate for the poor ones, the cost of insurance is so high that the good risks drop out because the insurance is clearly uneconomical for them, leading to further rate increases and more thinning of the better risks).

The Wall Street Journal tells us that Obamacare looks to be falling short of insurers’ fond hopes on a third front, that of the level of participation by the uninsured. Remember, even after Obamacare, many uninsured were expected to remain uninsured, due to the fact that some low and moderate income individuals eligible for subsidies would still find the cost to them too high. Brookings last September summarized the projections: of 60 million uninsured, 17 million would obtain insurance via Medicaid expansion. Of the remaining 43 million, 22 million, or roughly half, were expected to sign up, leaving 20 million, or roughly half, still without coverage.

Now remember, the picture so far is incomplete, since the data in the Wall Street Journal story is only as of the end of December, when consumers have until March 31 to sign up. And these snippets come either from small scale surveys or from a few of the insurers themselves. But they paint a broadly similar picture: the uninsured are participating at considerably lower rates than anticipated.

And it’s not simply the gross numbers, the 2.2 million that have enrolled, but the composition. Various sources indicate that the overwhelming majority of enrollees were previously insured. Either they had employers who used Obamacare as an excuse to drop coverage, or their plan was cancelled for not meeting Obamacare coverage standards, or they dropped their current individual policy and purchased an Obamacare plan instead. While the first two categories could produce more revenues to the insurers, the last type, people who switched from a plan they’d purchased in the individual market to an Obamacare plan, almost certainly isn’t, since they buyer would choose it only if he thought it was a better deal given his circumstances. For instance, non-Obamacare plans permit different pricing for men and women, while Obamacare plans require the same pricing for men and women who fall in the same bucket otherwise (same age, geographic location, smoker/non-smoker status). But younger women actually incur somewhere between 10% and 60% more in healthcare care costs than men, which means they typically pay higher premiums. This group would be likely to give Obamacare a hard look relative to their current plans.

In fairness, there’s a lot turnover in the individual insurance market (as in they might obtain a job with a large employer who provides insurance and thus drop coverage, or have a change in personal circumstances that leads them to upgrade or downgrade their coverage). That means you’d expect a fair number to switch over to Obamacare. But even allowing for this behavior, the proportion of uninsured enrolling is much lower than anticipated. A McKinsey survey found that only 11% of Obamacare enrollees had been uninsured. An agency, Health Markets, said that 35% the coverage it arranged was for the uninsured. A survey by Priority Health found only 25% had not had coverage before.

This gives an idea of how severely enrollment of the uninsured so far is undershooting expectations:

Michigan insurers collectively expected 400,000 of the state’s 1.2 million uninsured people to join private plans this year, Ms. Budden said, citing an internal analysis of insurers’ rate filings. As of the end of December, only 76,000 enrollees had arrived, many of whom were previously covered.

The McKinsey survey also didn’t give great cause to be hopeful. Of the people who’d looked at plans but decided not to buy, 52% found them to be unaffordable. Another 30% had “technical challenges”. It’s possible that many in that cohort will figure out how to surmount those problems and will sign up by the end of March.

Some experts saw that the uninsured might reject Obamacare. A January 13 post on Bob Laszewski’s blog (hat tip Lambert) observed:

But what if most of the uninsured literally don’t buy Obamacare?….

As I have reported on this blog before, many working class and middle class subsidy eligible people will find health insurance premiums on the exchanges, after federal subsidies, at about 10% of their after-tax income. The average standard Silver plan deductible is almost $2,600 and the average Bronze deductible is $4,300 according to Avalere Health.

More than two-thirds of Silver plans sharply reduce the number of hospitals in their provider networks over typical employer plans according to a McKinsey study. That means most of the second lowest cost Silver plans––the plan the subsidy is tied to––will be a narrow network plan.

It therefore becomes a difficult decision deciding whether to buy or not buy a health insurance policy.

The Journal oddly placed the best summary in the middle of the story:

“I don’t know we’re growing the number of people with insurance here, so much as we’re just adding complexity,” said Geoff Bartsh, vice president for policy at Medica Health Plans in Minneapolis.

And since complexity generally means more cost, the insurers may not come out of their little scheme to get the government to drive new customers to them anywhere near as well as they’d hoped.

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    1. Brooklin Bridge

      Prescient. Have you noticed the uptick in scare and tear-jerk groups advertizing for sympathy dollars? It isn’t just the third world anymore (or maybe it is and we just happen to fit now). Typically for 1)Police (telephone thugs implying mob-like “protection”), 2) Veterans (TV: “Folks, only 19 dollars a month…” -crank it up violins- “…ensures a veteran’s disability will be taken care of…”), 3) Firemen (more telephone groups – “wouldn’t want to be on the bad side of Fireman now would we?”) 4) Cute animals More TV: Animals badly treated by cruel owners. More monthly rent extraction.

      It’s hard to say how much of this is “real” and how much is pure scam, but the smell of scam gets a little more pungent each year..

  1. kimyo

    the young have no assets. if the middle-aged have any, they’re already all in, 401k stocks/bonds. only the seniors have wealth, typically in the form of a paid-for house.

    those seniors are most likely to experience high health care costs. if obamacare is indeed a ‘loan’, secured by a senior’s assets, then the insurance companies won’t be crying too many tears over poor enrollment figures.

    they’ll get all manner of tax accomodation while billing grandma’s estate for the last ten days she spent in hospital.

    obamacare looks more like a grab for the last slice of middle-class wealth to me.

    The Man Who Was Treated for $17,000 Less
    Bypassing his third-party payer, my patient avoided a high hospital ‘list price.’

  2. dearieme

    There’s great merit in the cliche “Follow the money!”

    Who has so far paid how much to whom? That’s what I’d like to know.

  3. TarheelDem

    Republican denial of Medicaid Extension in the states = mission accomplished.

    If you look at where enrollments are substantially lower, it is in the states that scuttled the Medicaid Extension.

    If it’s a mess, there is only one way forward. People who had pre-existing conditions are not going back to the pre-Obamacare era.

  4. Telee

    According to this link, the losses of the insurance companies will be largely covered by funneling tax monies over to the insurance companies. this is mainly coming from sources from the right like Forbes Magazine and others. Haven’t seen a thing about it in NC or other blogs I usually read. Can this be verified?

    1. Benedict@Large

      It’s actually a form of reinsurance, which the GOP crazies are acting like is something totally new, but has existed from the very first breaths of insurance. Here’s how it works with ObamaCare.

      1) Some companies will get too many sick people. Others will get too few. When this happens, the ones that got too few will kick some money over to the ones that got too many, so that everyone makes some profit without everyone fighting to avoid sick people.

      2) In the case of there being too many sick people for #1 to work, the federal government will kick in some extra money so that everyone makes some money and (importantly) no one runs for the doors.

      As I said above, the GOP is trying to make a big deal of this, but it is ordinary everyday reinsurance. The only problem is if the government gets on the hook for way too much. (Too many sick people; not enough healthy.) The GOP is saying this is a certainty, but in reality, they, like everyone else, have absolutely no idea if this will be the case.

      1. bh2

        “Reinsurance” is provided (for a premium fee) by private insurance companies to mitigate possible excess losses by retail insurers. When government mitigates those risks with taxpayer money, it is called a “subsidy”.

  5. realpolitik

    Politifact is a project of the Poynter Institute. It has had a strong Obama bias in the past to the point of omitting any fact contrary to the conclusion it intended to reach. The link above is no different. Read it. Krauthammer quotes the ACA. Politifact objects to his use of the word “bailout” and notes that if the insurance companies make a profit, the government will not be on the hook. That’s why it’s half-true. It is word parsing that allows the media to ignore that Doctors without Borders has only limited ties to intelligence agencies and thus can be referred to as “independent.”

  6. Andrea

    The only way around the uninsured getting insurance is to make it obligatory. A group of Obama’s advisors studied the Swiss system, as health care costs are here 100% taken on by a ‘private’ insurance (on the face of it) – they came here for discussions, etc. and borrowed (somewhat) from it.

    However, Obama could not make it obligatory, but only impose financial penalties for not being insured (and even that was iffy as future events showed and I suppose may even fall by the wayside in various ways in the future.)

    The entire concept of being penalized for not making a voluntary decision. i.e. entering an insurance scheme, is extremely bizarre. In other areas, minor legislation and practices on the edges forces ppl to buy insurance – e.g. – buying a house with a mortgage generally, world-wide, exposes one to contracting some kind of house insurance, to protect the lender, who can set his own conditions, because he is a banker.. Paying cash and seeing your house go up in flames is still most often considered simply personal risk-taking as it impacts only the owner, not the community.

    Health care is not the same, as the community ends up paying for it in any case in some measure, e.g. in the US: emergency services, police, Medicare, SSI, etc. stipends to AIDS sufferers, disability, public health in the form of vaccines etc., child nutrition aid / advice, and on and on. And that is without counting in personal, private inputs, such as bankruptcy for med. reasons, which obviously should be avoided, and charity, which takes up some of the costs.

    Some form of ‘single payer’ – run, and paid for, basically, thru a tax system – solves these problems in one fell swoop. (for ex. Canada.) It is the simple, obvious, solution. Is it the best? One shoe never fits all, it is hard to say.

    The problem with single payer in the US is that it would annul the for-profit motive (in the long term if properly done) and would gradually engulf several sectors of the economy which are at present making out like bandits and employing millions of ppl.

    Because, *in fine*, when the rubber hits the road, ppl will pay for granny’s comfort while she dies, to keep a spouse alive for 2 more years, a child free of misery and horrible pain, for self to be able to walk and thus work, etc. Scotching that squeezing of the hopeful and vulnerable would be a sea-change.

    1. Brooklin Bridge

      It should be noted that the Swiss system of health insurance has a very strong government regulation side which ensure that though “private”, insurance companies DO NOT make a profit on basic insurance plans. We have absolutely no comparable price control. Obama Snare has some rule about 80% of the take going to health care costs, but that is actually a government give away since the % was higher (90% or 95%) before Obama Snare.

    1. Doug Terpstra

      Right, just as long as they’re offset by higher “user fees” and more punitive penalties on “free riders”. Obamneycare is a PPO (Profit Protection Ordinance) for the insurance rackets. If it needs to be amended, Untied Health Care will “fix” it accordingly.

  7. Yancey Ward

    More and more, it appears the Democrats should have extended Medicaid eligibility to 400% of poverty level and made the extension fully federal in nature so that the state governments wouldn’t have had to decline it. Surely, in the end, this would have been far simpler and effective to accomplish than the Rube Goldberg Machine Obama, Pelosi, and Reid have given us.

    1. TK421

      They “should have” if they really cared about getting people health care. But that pretty clearly isn’t what they care most about.

    2. marym

      Medicaid is a for-profit wealth transfer process, not a path to providing universal healthcare.

      Here are links to

      Data as of 2011 showing the percentage by state of Medicaid recipients enrolled in managed care organizations;

      Data as of 2012 indicating that about half of these were for-profit, and also showing that only 11 states had a mandated medical loss ratio for Medicaid (supposedly non-profit managed care companies also spend money on practices like high executive salaries and privileges associated with for-profit businesses)

      ACA increasing opportunities to transfer dual eligible people from Medicare to Medicaid managed care

      A discussion of Medicaid estate seizure (search for estate recovery)

      If we’re looking for a simple path, that would be HR 676- Expanded and Improved Medicare for All – a completely public non-profit plan with comprehensive coverage, funded by progressive taxes.

  8. Yancey Ward

    And, to expand on my comment, some people forget how this came about in the first place- the primary driver of the ACA’s structure was the desire of Congressional Democrats to hold the CBO score of the bill under $1 trillion dollars in the 10 year window, make it appear to be deficit neutral, and to avoid levying taxes payroll and income taxes on people under $200,000/yr in income. ACA is the result of trying to do an unavoidably expensive insurance extension on the cheap at the governmental budget level.

  9. bh2

    “52% found them to be unaffordable”

    …which, of course, fully explains why Congress named this misery the Affordable Care Act.

    Apparently the poster of this article doesn’t realize the AFC provides full relief to insurers’ losses through taxpayer funding. They get paid either way. And then, next year, rates will again skyrocket further to reflect the actually realized costs after the death spiral.

    All of which only demonstrates, once again, how much jokester politicians enjoy playing fools among the general public who happily believe any government promise of a free lunch.

    1. diptherio

      You gotta put the emphasis in the proper place to understand the name. It’s the “Affordable Care Act.”

      What do you expect when our politics is all theater? The acts of our legislature become merely acts…{sigh}

    2. Yves Smith Post author

      You are missing the point of the article completely.

      Did I ever say anything about losses?

      The insurers were hoping to profit mightily from a big increase of their total # of policies written due to getting the formerly uninsured to be insured. Looks like that’s not happening on anything remotely approaching the scale they’d hoped for.

      As to the “covering losses” bit, that UNDERWRITING losses. Those admin costs for all those unreadable 834s aren’t part of that.

      1. bh2

        Yves, it somehow seems entirely unlikely that for-profit insurers would ever have believed people formerly unwilling to even pay for minimal catastrophic health insurance would suddenly be motivated to pay even more for O-care (which is not free even when subsidized). Underwriting losses are therefore likely to be huge if the composition of the pool of insureds is skewed away from younger-healthy people and toward older-less-healthy people. We don’t yet know, of course, because the administration is laying down a steady barrage of misleading statements and withholding easily captured data they would be crowing about from the rooftops if this genius plan were actually working out anywhere close to how it was advertised.

        When Richard Simmons has been recruited to promote it to younger people with hours of senseless patter and red-stocking leg lifts, well — ‘nough said. Little more evidence is required to demonstrate promoters are terminally desperate.

        It is also likely that insurers never anticipated the risk of a lawless president altering legislation solely on his lonesome and shooting from the hip. But if the SCOTUS holds that he has no such powers, then lower courts may be busy for years doling out taxpayer money to settle claims lodged by insurers for their administrative losses owing solely to serial government misfeasance.

        As the man said, “elections have consequences.” Yes, they do.

  10. diptherio

    I know a lot of poor people…I don’t know anyone who is signing up for Obamacare that didn’t have insurance already. Everyone seems content to pay the fine, since they can all do math pretty well and have figured out that the fine is much cheaper than the premiums+deductible+co-pay. And then, of course, there are those of us who don’t make enough for subsidies but too much for non-expanded Medicaid (my deductible under the cheapest Obamacare plans is $6000).

    1. Brooklin Bridge

      It’s absolutely incredible, like being tied down to the company store (the poor house in this case) that always charges you more than you make so you can never leave.

      I strongly suspect there will be a huge propaganda effort launched starting about the fall of next year to ratchet up the penalties year by year with the usual divide and conquer song, “so YOU -dear citizen- don’t have to pay for all those lazy ‘deadbeats.'”

      1. TK421

        Or “those darn Republicans want to kill Obamacare! Let’s raise the penalty for not enrolling to keep Obamacare strong and safe from [insert name of Republican boogeyman here]!”

        1. NotTimothyGeithner

          I suspect they will push Friedman Units. It worked before, and considering the advertising for ACA, the Obots aren’t too creative.

          1. Brooklin Bridge

            I think you’re right, but in parallel, they will try and ratchet up the penalties. The pressure from the insurance companies is going to be fierce if gov. subsidies don’t satisfy them (and they won’t).

            It’ll get up there just the way the water in the pot gets hotter and suddenly seems to be boiling. Hell, in ten years it will probably be one kidney for the first year without signing up, perhaps a hand or knee for the second, then an arm and/or a leg…

      2. Elliot

        I’ve been informing my acquaintances that are swanning over the nice subsidies they’ve gotten on Obamacare that I, and others like me at the bottom of the totem pole, are PAYING FOR THEIR SUBSIDIES through inflated rates, and that dandy clawback, but not getting health care.

        So far, universal shock, some disbelief, and generally shrugging. Most seem to feel as long as they have theirs, it’s OK. They do not care what happens to the poor, not a bit. They seem to think it is wasteful for the poor to be allowed to own anything.

        I do think that perhaps as the year rolls on and people 55 or over realize that medicaid paid visit they had for their flu infection is coming out of any real property they own….. and so is the doctor visit of their slightly more wealthy, and subsidized, friend… there will be a lot of anger, and possibly some changes.

  11. susan the other

    Canary in the coal mine. This is what happens when the public trust has become so abused that nobody shows up. Didn’t diptherio tell us about a true health insurance program in Montana? A good old fashioned mutual insurance and all inclusive insurance plan that is light years more trustworthy than this Obamarama and looks to be acceptable by Montanans. Obamacare just disgusts everyone.

    1. Lambert Strether

      Same thing happened with the program for people with pre-existing conditions, to give them a bridge to ObamaCare. Far fewer signups than expected. IIRC, the administration then shitcanned the program, screwing over the people who bought into it, q.v. HAMP.

  12. Cassiodorus

    Now, I appreciate the coverage NC has given to “Obamacare.” But two things come up:

    1) What we’re seeing is who has signed up so far. I’m sure there’s a large population that doesn’t want to pay the mandate penalty and doesn’t want to buy insurance — they may sign up in droves in March.

    2) What are the exemptions from the mandate penalty and how easy is it to get any of them?

    1. Yancey Ward

      Two things- (1) is a false hope the bill’s supporters- there will be no rush of such people in March, and (2) you don’t need a exemption- it isn’t against the law to not buy a policy or to not pay the penalty, you just need to be sure the IRS owes you no money on April 15th.

    2. NotTimothyGeithner

      Concerning your first point, how many Friendman Units will it take for ACA to be considered a successful program?

    3. Yves Smith Post author

      The administration keeps pushing out the sign-up deadline in hopes of getting more enrollees. This is looking increasingly desperate. Recall the December 23 deadline IIRC was pushed out a day, and then to Dec 28?

  13. MaroonBulldog

    “This is what happens when the public trust has become so abused that nobody shows up.” Well put. Most well put. Most excellently and superlatively well put.
    When the people can no longer trust the hypocritical government to carry out its own announced plans, they can scarcely be expected to execute a plan that the government announces for them.

    1. NotTimothyGeithner

      “What do we do now, lieutenant?” is the question which keeps competent military strategists up at night because they know decisions are made by 19 and 22 year olds or more simply people without access to the same info or security as the decision makers.

      Anything too complicated is doomed to failure because it demands decision makers who don’t have the same access to information to make decisions as individuals which will directly affect them as opposed to the policy makers.

      ACA is the baby of the same guy who according the the Gates book pushed for a surge in Afghanistan despite not being supportive of the idea. Yikes!

  14. Bridget

    “I don’t know we’re growing the number of people with insurance here, so much as we’re just adding complexity,” said Geoff Bartsh, vice president for policy at Medica Health Plans in Minneapolis.”

    Not to mention piling on costs. Arrgh. Go find wall, beat head against it.

  15. Pat

    I know one person who has signed up for insurance. This actually helped him because he got a better plan for less then the one he had before. I know another who was planning to signup. It was nice when the person who did sign up, looked up from the NY state health exchange web site and said “if this one works the national one must be hell because this is a mess.” And then admitted he couldn’t tell enough from it to be sure his doctor WAS part of the companies network because of conflicting information. Ended up having to call individual companies in order to get enough information to actually find the best plan. That isn’t going to encourage people who are wary of this and the expense to do it.

    As for my friends and myself who are largely underemployed and without insurance, well the penalty it is. Two of them weren’t insured last year. I just lost coverage. None of us can afford to pay for the “Affordable” Care Plans – especially since so little actual health care comes with it.

    And for the person who mentioned the Swiss system above let’s get this straight. Their subsidies are greater. Their groups are larger by design (both for regions and ages) meaning that premiums are less likely to be all over the place, all the basic plans are non profit as in NO profit, have strict ratios beyond that, there are real controls on network sizes which do not allow for the harsh limitations seen here, emergency care is covered regardless and as for cost premiums are lower while most of the deductibles on our silver and bronze plan start or exceed their top maximum out of pocket. IOW, Switzerland has actually worked hard to make sure their mandatory/compulsory insurance is not only much cheaper then ours to begin with it but that insurance companies actually cover more health care then a physical for those premiums. And it is far from perfect, as it is the most expensive version of ‘universal’ coverage out there until now. We took that, made it more expensive and less universal.

  16. Cindy W.

    Appreciated Andrea’s comment #10, as it addressed the fact that “the community ends up paying for it anyway” – since that was how O-care was sold to the affluent insured(“you won’t be paying for those free riders in the ER”), if subsidies/higher premiums/less coverage mean they’ll still be paying for it, just in a different form, why aren’t they upset about that? (probably don’t understand it yet?)

    1. NotTimothyGeithner

      Don’t underestimate emotional investment. Plenty of Democrats whether in public or private denounced liberal critics of the President as racist or unicorn chasers, and they never addressed these issues. If they acknowledge these issues, they have to acknowledge their own failures and look at their moral responsibility for supporting the clown in the White House.

      If ACA isn’t all peaches and cream, is slaughtering children in Pakistan a good idea? That is the next obvious question. They would have to address their moral behavior, and they don’t want to because quite simply their ignorance is just appalling at this point.

      I’m not including low information voters. They are the by-products of constant propaganda and often lack the education to have frames of references. Unfortunately, they often trust the Obots.

  17. Scott Greene

    The Obamacare insurance program has been going on now for almost 4 months.
    In that time the following has occurred:.
    The website initially was not built in the front end
    The website is currently not built on the back end
    Hacking experts have testified that the website is not safe
    The people who sign you up over the phone (and to whom you give your identity information) have not undergone any background checks
    People are finding they can’t keep their doctors
    People are finding that certain medicines they take are not covered
    People are finding that their doctor and hospital networks have shrunk.
    Government spokesmen say that out of those who have signed up, they do not know how many have actually paid their premiums.
    Late night comedians ridicule the program
    The majority in the country do not want it.
    Various democrats have stated they do not like it parts of it. .
    A majority of doctors are against it
    The name they call it – Affordable Care Act – is the opposite of the truth as it it NOT affordable.
    And the whole program has to be supported by government subsidy money because the true cost of the premiums are too high. So the only way certain people can afford it is by the government paying all or part of their premiums..
    Obamacare needs a total makeover and it is my hope that more Democrats will speak up and initiate the changes that are necessary to fix this absolute mess.

    1. NotTimothyGeithner

      “it is my hope that more Democrats will speak up”

      HAHAHA. Democrats are too emotionally invested to change course. They have been attacking liberal critics since 2010 and telling low info voters how wonderful ACA is. Without Obama falling on his sword, the Obots will swarm against any disloyal Democrat, and the low-info Democrats will be split because they now have make a decision between trusting Obama, their own lying eyes, the DFH’s, or the Democrats who NOW might tell the truth who bashed the DFHs all along.

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