Obamacare Customers Skew Older as Young Wait for Pitch
The U.S. government said it would ramp up Obamacare outreach in 25 cities to lure younger people to the program after a report showed about 70 percent of the initial customers are 35 years of age or older.
The effort by the Obama administration and allied interest groups will focus on a Feb. 15 target to sign up people for coverage beginning March 1, said White House officials, who spoke to reporters on the condition they not be identified.
The Obama administration wanted people younger than 35 to make up about 40 percent of total enrollment to help offset the cost of care for older and sicker people. Missing the target for “young invincibles” may lead insurers to adjust prices if gains aren’t made by the official March 31 end of enrollment.
“It is more of a scale than a cliff,” said Robert Zirkelbach, a spokesman for America’s Health Insurance Plans, the industry’s lobbying group in Washington. “The more young, healthy people participate, the more stable the marketplace will be and the more affordable premiums will be.”
The federal- and state-run insurance exchanges, the heart of the Patient Protection and Affordable Care Act, enrolled 2.2 million people for private health plans in the three months ended Dec. 28, the U.S. Department of Health and Human Services said in a report released yesterday. About 24 percent were 18-to 34-year-olds, and about one-third were 55 or older.
Waiting for March
The average age of people enrolling in ACA plans is estimated to be 43 nationwide, while the average age of all non-elderly Americans is 32, Carl McDonald, a Citigroup Inc. analyst estimated today in a note to clients. Health plans probably didn’t assume more than a 10-year difference between exchange plan customers and the U.S. population, he said.
“As a result, plan margins on exchange products will be lower than expected, even after accounting for the protections insurers have in place,” he said.
The health law includes three programs designed to limit the risk insurers face in the exchanges and compensate plans that suffer large losses. As a result, the companies face “manageable downside risk given prudent pricing,” Ana Gupte, an analyst with Leerink Partners, said in a note to clients.
“We’re all-in on the ACA and we’re happy we are,” Health Net Inc. Chief Executive Officer Jay Gellert said today at the JPMorgan & Chase Co. health-care conference in San Francisco. “We think that the projections and the assumptions we’ve made have been good.”
Obama administration officials said there is momentum behind enrollment by young adults, as eight times as many people ages 18 to 34 signed up in December as in November and October. Website outages, software failures and other technology flaws had thwarted the attempts of at least 1 million to sign up in the first month, while others may have decided to wait until closer to the March 31 deadline.
“It takes some time, particularly for young people who are new to health care, to figure out their options,” said Aaron Smith, 31, executive director of the advocacy group Young Invincibles, which is helping enroll people in Virginia, Arkansas, New York and Washington, D.C. “It’s kind of logical that people who are sick would be more likely to sign up right at the beginning.”
The $1.4 trillion law known as Obamacare requires most Americans to obtain health insurance by April or pay a penalty of as much as 1 percent of their income. The patient-mix is important to insurers who would have to decide by the end of May whether they want to keep selling exchange plans in 2015.
Insurance premiums may rise next year if more young adults don’t sign up. That could provide an opening for Republicans in Congress who have attempted to repeal or dismantle the health law more than 40 times since its passage in 2010.
“Youth enrollment has been a bust so far,” Brendan Buck, a spokesman for Republican House Speaker John Boehner of Ohio, said in an e-mail. “When they see that Obamacare offers high costs for limited access to doctors -- if the enrollment goes through at all -– it’s no surprise that young people aren’t rushing to sign up.”
Humana Inc. (HUM) said last week it was evaluating its expectations for the law’s effect after the initial wave of customers appeared to be sicker and costlier than anticipated.
“We’re confident based on the results we have that we’ll have an appropriate mix enrolled in coverage,” Mike Hash, the director of HHS’s Office of Health Reform, said yesterday on a conference call. Young adults should enroll in greater numbers as the March 31 deadline approaches, he said.
The law allows those younger than 26 to remain on their parents’ health plan. About 3 million young adults have taken that option, Kathleen Sebelius, the HHS secretary, said.
Congressional analysts had projected the government-run insurance markets would attract about 7 million people in the initial six-month enrollment period. To keep the system financially stable, the White House had said it needs about 2.7 million of the new enrollees to be young, healthy customers.
“Despite the near-term uncertainty we believe exchanges will be growing,” WellPoint Inc. (WLP) CEO Joseph Swedish said at the JPMorgan conference. “We are more focused on the end game of exchanges than the twists and turns in the near term.”
The market can still “self-correct” to an extent if many more older people enroll than young people, said Larry Levitt, a senior vice president at the Kaiser Family Foundation, a Menlo Park, California-based nonprofit that studies health policy. Insurers are allowed to charge older people as much as three times the premium for their youngest customers. That limits the amount premiums would have to rise for younger people.
“If insurers could charge unlimited age rates they’d probably vary premiums by a factor of about 5 to 1,” Levitt said in a telephone interview. “Premiums vary by age, they just don’t vary quite enough to make up the difference in cost between younger people and older people.”
Kaiser had estimated that about 40 percent of potential exchange customers would be from 18 to 34, which aligns with the Obama administration projections. Premiums may increase by about 2.4 percent next year if only 25 percent of customers come from that age range, Levitt said.
“That assumes that insurers assumed a disproportionate mix of enrollees as they set premiums” for 2014, Levitt said. “It’s likely many insurers made the assumption that the risk pool would be older than the potential market.”
From Oct. 1 through Dec. 28, about 1.2 million people enrolled in private plans using the federal exchange, which covers 36 states including Texas, Florida, Illinois and Ohio, according to the report. About 957,000 signed up in states that run their own exchanges, including California, which alone enrolled almost 500,000.
Florida saw 158,030 people enroll and New York state, which runs its own exchange, had 156,902.
The demographics of people signing up for coverage varied from state to state. In West Virginia and Arizona, 17 percent were 18 to 34, while in Washington, D.C., 44 percent of exchange customers were in that age range.
About 79 percent of people who enrolled in an exchange plan got a discount on their monthly premium thanks to federal subsidies, the report said.
Nationwide, about 54 percent of people in exchange plans were female. The administration plans to “focus on reaching young adults and in particular young males” in its efforts through March, Julie Bataille, a spokeswoman for the Centers for Medicare and Medicaid Services, said on the conference call.
The Obama administration already planned to target 25 cities, led by Dallas, Houston, Miami, Atlanta and Phoenix, according to the White House officials. They said the enrollment trends are on a good trajectory, citing the demographic pattern set by the Massachusetts health insurance expansion in 2006-2007, a model for the federal law.
When Massachusetts started its health-insurance exchange then, younger and healthier people were the most likely to procrastinate until the final weeks of the 11-month open enrollment period to obtain coverage.
By November 2007, the last month to sign up to avoid a penalty, the proportion of enrollees age 35 or younger was 36 percent, compared with an average of 24 percent in the first six months, according to an analysis by professors at Harvard University, the Massachusetts Institute of Technology and Wellesley College.
In addition to the 2.2 million people who signed up for private health plans, about 1.6 million people who sought coverage in exchanges were determined to be eligible for Medicaid, the state-run program for low-income people, or state children’s health plans, according to the report. Federal officials said they didn’t know how many of those people were made newly eligible for Medicaid by the health law and how many were already eligible for the program.