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California data shows disproportionate enrollment by those over 55

California has frequently been cited as an early Affordable Care Act success story with enrollment coming at least closer to projected numbers than in other states. Today’s release of information from Covered California, the state entity organizing enrollment there, shows a mixed picture about the likelihood that the ACA will become a stable source of non-discriminatory relatively inexpensive health insurance in the nation’s most populous state.

A highlight from the report is that 79,891 have at least gotten as far as selecting a plan since enrollment opened on October 1, 2013.  That’s better than any other state and better — at least as of the last report — of all the other states combined using the healthcare.gov portal. And, because, contrary to the wishes of California Insurance Commissioner Dave Jones, Covered California has decided not to permit those with recently enrolled in underwritten individual health insurance to “uncancel” policies that do not provide Essential Health Benefits, there is the potential to add more people to the Exchange pools than would otherwise be possible.  Additional good news: the pace of enrollment has picked up over the past two weeks. Still, to date, the 79,891 who have at least selected a plan are only 6% of the 1.3 million that the federal government projected California would enroll through 2014. And the web site in California appears to be working acceptably.

Perhaps the news on the number of enrollees is equivocal.  It’s better than other states, and it’s still early, but, relative to the projections on which the ACA was premised, it is not good at all.  There is also, however, what appears to me to be distinctly troubling news coming from California.  We have another report on the age distribution of enrollees: so far, it is disproportionately old. And this is true in the state in which enrollment has progressed the furthest and in the nation’s most populous state. So, the data is potentially significant not just as an augury of what may be seen in other states but because a disproportionately elderly population in the largest state is, in an of itself, a problem.

Although persons age 55 through 64 constitute about 18% of the California population aged 18 through 64, they constitute double that, 36%, of persons in that same age segment who have enrolled for a plan. Similarly, although persons age 45 through 64 constitute about 41% of the California population, they constitute 59% of those who have enrolled thus far. As discussed earlier on this blog and elsewhere, because premium ratios between old and young are capped at 3 to 1, whereas actual claim ratios are likely to be higher, disproportionate enrollment of the elderly can help drive an adverse selection death cycle.  This would be all the more true if the older people — it’s hard to call people age 55 “elderly”” —  that are enrolling are disproportionately unhealthy relative to their age-group peers. Claims, therefore, by Covered California Director Peter Lee that “enrollment in key demographics like the so-called young invincibles is very encouraging” rest on theories of economics and statistics that I do not understand.

A Side Note on Market Concentration

By the way, who’s on the hook in the event the ultimate pool is distinctly more expensive than insurers anticipated?  It’s the usual suspects. The big “winners” in California thus far are the usual suspects: Anthem Blue Cross has 28.1%, Kaiser Permanente, a California fixture, has 26.8%, Blue Shield of California has 25.6% and Health Net (with headquarters in Southern California) has 15.7%. Together, these four have 96% of the market with a “Herfindahl Index” of a moderately concentrated 2410. Dreams, therefore, of new competitors entering the marketplace, thus far seem illusory.  But it is these “winners” that stand to lose the most money — and be the greatest recipient of federal redistributions under Transitional Reinsurance, Risk Corridors and Risk Adjustments — in the coming year if the trends hold up.

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