Tag Archives: Colorado

Winter is coming?

For the past year or so, ACA proponents have gloated over the fact that markets have not yet collapsed in a death spiral and that enrollment in Exchange plans has grown to 9 million.  There are at least four recent developments, however, that suggest the ACA is in greater trouble than many realize.

Enrollments Way Lower Than Projected

The first piece of troubling news comes from CMS itself: Notwithstanding the full implementation of the individual mandate, CMS is projecting anywhere from 9.4 million to 11.4 million people enrolled in the Exchanges, an increase of 3-25% over its figure for 2015.  And, while ordinarily growth rates of this nature might please insurers, the projections on the basis of which Obamacare was enacted asserted that 21 million would be in the Exchanges by 2016.  Thus, while the Exchanges were running at 70% of original projections in 2015, they are now projected to run at just 45 – 52% of projections for 2016.  Moreover, between 0.9 million and 1.5 million of the enrollees for 2016 are projected to come  not from the uninsured but from those already holding off-Exchange individual market policies.

The new projection
The new projection
The premise on which the ACA was enacted
The premise on which the ACA was enacted

The reduced enrollment in the Exchanges has several ramifications. First, it likely means the pool in the Exchanges is less healthy on average than expected. Second it means the significant overhead expended in establishing the Exchanges and running them is spread over a lot fewer people. And third it means that Obamacare was essentially passed on greatly exaggerated assertions of its benefits.  Does the extraordinarily elaborate and expensive apparatus is establishes make sense when the a far lower than projected number of people gain health insurance of quality? One also must wonder how the dilution of the individual mandate through various “hardship exemptions” may have lowered the number of people enrolled on the Exchanges.

[[Added 10/20/2015]] For an excellent analysis of this issue, look also at Brian Blase’s recent article in Forbes. (http://www.forbes.com/sites/theapothecary/2015/10/19/examining-plummeting-obamacare-enrollment-part-i/)

Footnote 1: CMS is now “unable” to make projections for the SHOP Exchanges.  Are we now prepared to call them a bust?

Footnote 2: It is not clear whether the CMS enrollment projections took into account the very substantial gross and net premium that appear to be coming (see below).

More Coops Closing

The second piece of disturbing news is that at least four more coops insuring a significant number of people on the Exchanges are going out of business.  They are as follows:

Health Republic Insurance of Oregon (10,000 members; $50 million startup “loan”). By the way, Dawn Bonder, CEO of Health Republic, was quoted in The Oregonian just a month ago as follows: “We are strong and we are sticking to our plan, which has always been slow and steady growth. We’re very financially stable,” Bonder said. “We see a long,healthy life in front of us.”

Colorado HealthOP (83,000 members; $72 million in startup “loans”).  According to the Denver Post, this comes after the coop increased its enrollment seven-fold and captured 39% of the market in Colorado by cutting rates in 2015 (notwithstanding losses the year before).

Kentucky Health Cooperative (51,000 members; $146 million in federal loans, with a $65 million “emergency solvency loan” in 2014).  Again, this coop managed to capture 75% of the Kentucky Exchange market by offering insurance at lower prices.  Before shutting down, it had requested a 25% increase in premiums for 2016.  By the way, anyone remember those stories about how Kentucky was the success poster child for the ACA? It looks like its success may have been built primarily by selling insurance at cut-rate prices hoping that most of the losses would be bankrolled by the federal government.

Tennessee Community Health Alliance (27,000 members; $73 million in federal startup loans).  How had this coop captured market share?  Apparently by charging premiums so low that, as reported by The Tennessean, it had to request a 32% increase for 2016 and was granted/directed — get this — to offer premiums at a 45% higher rate.

Many of the coops blame their failure on the Cromnibus law enacted in December of 2015 that prohibited use of non-appropriated funds to pay for the federal Risk Corridors program that, on paper, was supposed to have the federal government backstop up to 80% of losses.  Given the magnitude of insurer losses thus far, the federal government is thus able to pay only 12.6% of the obligations created on paper by this program.  If one assumes, however, that the coops are correct in blaming Risk Corridors rather than mismanagement for their failure, this would confirm the suspicions of many that insurers priced their policies deliberately low in order to bring in business, relying on the federal taxpayer to cover their losses. I would also not be surprised to see some sort of legal action relating to coops who, notwithstanding Cromnibus and the handwriting on the wall persisted in booking Risk Corridor receivables at full value until very recently.

There will surely be lots of finger pointing over the failure of these coops: Democrats pointing to the “evil” Cromnibus bill as the source (although many Democrats voted for the legislation) and Republicans pointing to the inherent flaws in the ACA as the root of the problem. In the meantime, however, in many states, one of the sources of lower-priced insurance has been eliminated, meaning that many will be seeing substantial increases in gross premiums.

The fall of the PPO?

One of the promises of the ACA was that it would continue to offer choice to consumers and that they would be able to keep their doctor.  Not so in many states.  Plans that offer greater degrees of choice in selecting one’s provider appear to be in some trouble, closing in the shadow of an impending adverse selection death spiral. In Florida, for example, zero PPOs will now be available on the Exchanges in 2016.  In Texas, the state’s largest insurer, Blue Cross and Blue Shield, has announced that it lost so much money on individual PPO plans that it will no longer sell any in 2016. This development means 367,000 people will have to find other types of plans. In Illinois, Blue Cross is continuing PPOs for now, but only with narrower networks than had been available under a plan that had served 173,000 individuals.

I suspect this is just the beginning of problems for PPOs sold on the individual market in an era when insurers can not medically underwrite.  Between 2014 and 2015, PPO premiums went up at a far higher rate than other plan types.  We will shortly have the data to see whether this trend continued in 2016.

Rates

We don’t have all the information yet, but if ACA proponents like Charles Gaba are correct, we are looking at some substantial gross premium rate hikes in the United States, and extremely high rate hikes in some states.  What Mr. Gaba has done is to go state by state through various filings and do what no one else has tried: correlate premium rates with actual enrollments.  Although I do not always agree with Mr. Gaba, I must praise him for a very worthy and time consuming enterprise. The fact that some insurer is charging an astronomical premium for insurance doesn’t mean as much when few people are buying their product as it does when an insurer is getting a large share of the business.  Unfortunately, the federal government does not publish in any place I can discover insurer-by-insurer breakdowns of enrollment.

The research suggests gross premiums will go up 12.45% nationwide once enrollment weighting is taken into account.  Statewide figures range from a high of 41.4% in Minnesota, 39.0% in Alaska, and 30% in Hawaii to lows of 0.7% in Maine, 0.7% in Indiana and  3.5% in Connecticut.  Among the bigger states, the estimates are 4% for California, 15.8% for Texas, 9.5% in Florida, and 7% in New York. As I have noted on this blog and in testimony before a Congressional committee, net premium increases — which is what really matters to purchasers — can often be considerably greater than these figures, particularly for poorer individuals, but also can be lower.

 

More to come

We will, of course, see what plays out.  But for those who thought the brilliant engineering of Obamacare had forever slain the adverse selection dragon, beware. Dragon eggs can hatch.

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Coverage on January 1, 2014 matters

Contrary to the views of some, the number of people who have insurance coverage through the Exchanges as of January 1, 2014, matters to everyone.  It matters because the pool that exists on that date will determine, at least for a while, whether the premiums charged by insurers in the Exchange are likely to be stable and the extent of the federal government’s multiple obligations to subsidize plans purchased on the various Exchanges. It is not as if insurers get a claims paying holiday simply because more and healthier people may enroll later in the year. It also matters because a major point of the Affordable Care Act was to increase in an efficient and relatively painless way the net number of people who have insurance or social protection against significant illness.  If the numbers in the Exchanges and in the expanded Medicaid program do not way more than offset the number of persons who lose their insurance as a result of the ACA, or if the cost of extending health protection in this fashion proves too high, the ACA will not have accomplished its goals.

Given the chaos that has erupted as procrastination strains Exchange infrastructure and deadlines are repeatedly extended, it is difficult to tell right now whether the ACA is performing as hoped. A few things are clear, however. The first thing is that the Obama administration is not releasing the sort of information from which an objective assessment could be made.  Platitudes such as “Millions of Americans, despite the problems with the website, are now poised to be covered by quality affordable health insurance come New Year’s Day,” from President Obama at his last press conference are just not a substitute for knowing how many people have enrolled in the plans in the various Exchanges, and more importantly, have paid for coverage. What are their ages? How about some real numbers as a Holiday present?

Second, the Obama administration is acting as if a large number of enrollees in the aggregate is the measure of success. This is simply not true. Putting aside the problem of it being paying customers rather than mere enrollment that ultimately matters, meeting or exceeding projections in some states does not compensate for deficiencies in many other states.  Because the pools are state-based, Texas insurers and insureds are not helped if enrollment in New York or Connecticut exchanges ultimately equals or exceeds targets. The insurance market in Texas and many other states will still be unstable with some insurers likely pressing for significant premium increases, contemplating withdrawal from the Exchanges, and demanding larger subsidies from the federal government via Risk Corridors and other programs.

Third, even those who have been on the more pessimistic side of matters, must acknowledge that there has indeed been a surge in many state Exchanges and in many states covered by the federal Exchange. On December 11, I wrote: “With a decent last minute kick, it is not unimaginable that California could make 1/3 of its total by the December 23, 2013 deadline and get closer to its ultimate goal by the end of March.” With enrollments at 17,000 per day, California may in fact be there. Colorado, which previously had dismal enrollment numbers, reports 33,356 enrolled as of Monday, which puts it at of the 136,000 projected enrollment for 2014 and 52% of the way towards the Obama administration’s projections for this time of the open enrollment season. (33356/(0.47 x 136000)). Other states such as New York and Connecticut, which previously were doing better than most, have also reported a high pace of enrollment.

Whether that surge has been as large in many other states remains to be seen. Proponents of the ACA like to cherry pick their states with at least as much zest as opponents do. Perhaps both sides share the belief that insurance enrollment is at least much a social phenomenon as a purely economic one. Numbers for large states (with large numbers of uninsureds) such as Texas, Florida, Georgia, Indiana,  Illinois, North Carolina and Florida have yet to report any numbers that I have seen.   And, as mentioned above, even if California and New York and some other states have enrollment sufficient to forestall premium instability and possible entrance into an adverse selection death spiral, that will not greatly help states in which enrollment ends up being less than half of that projected.

Finally, we need to look beyond the last minute holiday rush for health coverage and see what happens between now and March 31, 2014. The carrot of the ACA has basically been eaten for 2014.  If you wanted health care coverage and could afford the prices on the Exchange it made little sense to wait until after the December deadline to acquire it.  This is all the more true given that the President has permitted people to game the system by simply enrolling in a plan now and deciding until January 10, 2014, whether to pay.

Now, however, the first surge is likely over.  Will there be the needed second surge? All that really remains is the stick: the individual mandate tax penalty.  Many people, including me, believe that even before the events of last week, it was too small in 2014 to achieve its goal of inducing enrollment by those in good or average health.  The number of people for whom insurance would not be a good deal at, say, $2,000 a year net but for whom it would be a good deal at (effectively) $1,705 per year ($2,000 – the $295 per person tax penalty) is not likely to be enormous. This is so because ACA premiums often depart greatly from actuarial risk by their prohibition on medical underwriting, accurate age rating, gender rating and their — shall we say — loose enforcement of tobacco rating.

Moreover, with the administration exempting last week upwards of half a million people from the individual mandate, the number of people who need fear the stick got even smaller.  So, yes there are mega-procrastinators or people who have been stymied by the dysfunctionality of various Exchange website in obtaining coverage. There are former skeptics who see their neighbors helped by health insurance coverage under the ACA and who now enroll just as there may be some turned off by whatever problems emerge in administration of the plans.  On balance, I would not be surprised to see modest increases in enrollment between now and the middle of March.  I remain highly skeptical, however, that there will be a second surge equivalent to what has occurred this past week.  As they say, however, only time will tell.

Personal Note

I am enjoying a family vacation in the Colorado mountains this winter holiday.  It’s snowing outside my window as I write this and the beauty of a quiet snowfall can eclipse what may seem so important at other times. So please continue to read ACA Death Spiral periodically, but don’t expect a huge amount of activity for about the next week.  I’m confident we’ll be back exploring issues in the new year.

 

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The new Exchange enrollment numbers are bad

The federal government announced today that 137,204 people have selected a healthcare plan through the federal Exchange as of November 30, 2013. The number is an increase over the 29,794 who had done so by the end of October, a month during which the website portal for enrollment, healthcare.gov, was in disarray. The government reports that 258,497 have now selected a plan through one of the state Exchanges, making a total of 364,682 enrolled. Asked by reporters whether the Obama administration stands by its estimate that 7 million will enroll in individual plans sold on the various Exchanges by March 31, 2013, the day necessary to do so in order to avoid a tax penalty,  Michael Hash, director of the office of health reform in the federal Health and Human Services Department, said that they were “on track, and we will reach the total that we thought.”

The pace of enrollment announced by the federal government today is inconsistent with the claim that its 7 million goal will be achieved. The claim rests on hopes of two surges, one taking place over the next 12 days before the December 23, 2013, deadline for coverage starting January 1, 2014 and a second surge taking place as we approach the end of March at which point, if coverage has not been obtained, many Americans will be hit with a tax penalty.

The magnitude of the surge required strains credulity.  A scenario in which most of  those who wanted coverage have already applied and in which the pace of enrollment stays the same or even sags for lengthy periods as we go forward would appear almost as likely. Plus, it seems unlikely that there will be major enrollment between December 23, 2013, the first deadline, and March 23, 2014, the second deadline. If someone wanted coverage, they would try to get it earlier. What does applying in the middle of February accomplish? Moreover, if, given the unpredictability of human behavior, the surge actually materialized, it might well strain the government’s computer systems.

Analysis

There are many disturbing aspects to today’s release of numbers. First, forget for the moment about the March 2014 projection date and the March deadline.  There are only 12 shopping days left before the pool will be closed for those who will have coverage as of January 1, 2014.  Even if the pace of enrollment surges by a factor of 10 over what it was for the last two weeks on which we have data and healthcare.gov enrolls people at 45,000 per day, that would still put only about 668,000 persons enrolled through the federal Exchange as of that deadline.  Even this rather cheery estimate would result in only 14% of the 4.8 million the Obama administration has projected will be enrolling in the federal Exchanges in 2014.  The original projections for enrollment on opening day, January 1, 2014, were considerably higher, 3.3 million.

The number enrolled as of December 23, 2014, matters greatly. While of  course there could be a second surge, in the mean time insurers are having to pay claims for three months on those first 14% to enroll. The initial enrollees are very likely to be comprised disproportionately of people with above average health care expenses. The result will be that, until that prayed-for second surge occurs, insurers will likely be losing large sums of money in the Exchanges and, ultimately, seeking reimbursement pursuant to the Risk Corridors program from the federal government and, derivatively, taxpayers.

Moreover, the aggregate numbers mask the fact that there are 50 different sets of Exchanges. While numbers are better in some, there are many jurisdictions in which there are huge problems.  It is not “OK” if the Exchanges succeed in California, New York and a few other states if insurers and insureds in many other states suffer severe adverse selection problems that result in rapidly rising prices or reductions in availability.

Let’s look at a few states. I start with Texas. There, out of 780,959 projected to be enrolled, there are 14,038 as of the end of November.  This is fewer than 2% of the ultimate projected amount.  Even if one assumes that enrollments in Texas surge to go 20 times faster in December than they did in November, which is a pretty heroic assumption, this would still result in only 183,425 being enrolled as of the December 23 deadline. This would be  only 23% of what needs to occur. It would be as if a football team were down 35-3 in the 3rd quarter and hoping to make a comeback. It could, I suppose, happen, and you shouldn’t turn off the TV set, but the probabilities are remote.

One might argue that Texas is an exceptional case due to the degree of hostility prevailing among many here about “Obamacare.” Take another fairly large state using the federal Exchange, Pennsylvania. There, we see 11,788 enrolled out of 268,858 ultimately projected, just 4.4%.  To get to even 1/3 of the ultimate projected number being enrolled by December 23, the pace for December would have to be 6 times greater than it was in the last two weeks of November. Not impossible given procrastination, but again, a major challenge.

The figures when one looks to the various state Exchanges are a mixed bag. The poster child for the Obama administration would appear to be California. It has 107,087 of the 691,016 it ultimately hopes to enroll, over 15%.  With a decent last minute kick, it is not unimaginable that California could make 1/3 of its total by the December 23, 2013 deadline and get closer to its ultimate goal by the end of March.  But even with these better-than-average numbers, there is the risk of at least some adverse selection in a pool substantially smaller than projected. Also doing better than many is New York. There, we see 45,513 enrolled. But even this is but 11% of the 411,304 projected. It will again take a major surge over the next 12 days if New York were to get to even 1/4 of the ultimate projected enrollment by the December 23 first deadline.

But for every California or New York running its own show, there is an Oregon or a Maryland. These are large states in which enrollment is lagging. In Oregon, owing substantially to the collapse of its computer system, only 44 people have enrolled in plans on their Exchange. It will take an unimaginable surge there to make the system functional. Officials there and in Washington, D.C. will soon need to start contemplating what to do about a failed system; will, for example, tax penalties be imposed for those in Oregon who do not have health care coverage? In Maryland, where the director of the program recently quit, just 3,758 have enrolled out of 91,528 projected, just 4.1%. It goes beyond hope and into the realm of fantasy to believe that Maryland is not going to have a serious adverse selection problem starting January 1, 2014, when those 3,758 who penetrated the state’s application system start filing claims.

Finally, nowhere in the release do I see an age distribution of those enrolling. Unquestionably, the administration has this information. It is required in the enrollment process. And, perhaps this is a bit cynical, but I have to think that if those numbers looked good, if the hoped-for proportion of younger persons were enrolling, the Obama administration would release the information.  I believe we are entitled to draw a negative inference from the fact that the information was not released that the pool is disproportionately elderly. If this is correct, what we are seeing is a small pool composed disproportionately of the elderly. That does not augur well for those who want to see the promises of the Affordable Care Act fulfilled.

An Experiment

HHS was kind enough to include a graphic in their report. Here it is.

Cumulative enrollment in the federal Exchange for various states
Cumulative enrollment in the federal Exchange for various states

The graphic plots time on the x-axis and cumulative enrollment on the y-axis. Recognizing all the enormous problems with doing so, I thought it would still be interesting to try to fit a curve to the data and extrapolate it out to see where we might end up.

The short version is that if we extrapolate the curve using quadratic and cubic models, we end up at between 278,000 to 383,000 enrolled in the federal system by the December 23, 2013 first deadline. This would represent fewer than 10% of the ultimate projected enrollment and will create substantial adverse selection problems for at least the first three months of the program, particularly in the less enthusiastic states. This all assumes, of course, that all people who have selected a plan actually pay the premiums. The numbers could be worse. Regardless, insurers are going to be very concerned if these are the sort of numbers that materialize; the federal government better get out its Risk Corridors checkbook to help relieve the pain.

By March 23, 2013, however, the same models show we could be at 1.35 million to 3.94 million, depending on the model chosen.   This would represent 28% to 82% of that originally projected and would cause serious adverse selection problems at 28% or mild adverse selection problems at 82%.  I appreciate fully that these are large error bars but we just don’t have the data or an a priori model that permits me to extrapolate with any confidence this far into the future.

Here’s a graphic showing these results.  The Mathematica notebook that generated them has been placed here on Dropbox.

Extrapolation of enrollment data
Extrapolation of enrollment data

 

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Colorado enrollment numbers look bad

According to a news report today from the Associated Press, the enrollment numbers in Colorado are about half of what the state had projected as its “worst case scenario” for enrollment in its Exchange.  The  6,001 Colorodoans who have enrolled thus far (and that is enrolled, not yet paid) is also way less than the 20,186 that had served as the midpoint projection for this time in the open enrollment season. Colorado officials apparently believed that 136,000 people would enroll by the end of 2014. Enrollment  thus far has apparently been complicated, however, by a requirement that  consumers seeking a subsidy on the exchange first find out if they qualify for Medicaid, which may require a 12-page application.

Three facts make the low Colorado numbers yet more troubling for those concerned either about a reduction in the number of uninsured individuals or about the prospects that those getting enrollment in the Exchanges for 2014 will shortly find themselves sucked into an adverse selection death spiral.

First, these low figures are coming in a state where the web site has, for the most part, been operating respectably (further details here) and not in a state dependent on healthcare.gov.

Second, it comes in a state where between 106,000 and 250,000 individual health insurance policies have been cancelled. I have an inquiry in but have not yet been able to find from published sources whether Colorado will permit insurers to reinstate those policies and under what conditions. [LATE BREAKING NEWS at 13:52 Houston time: Colorado insurance official says Colorado expects to announce a decision on this point later today or tomorrow (per email from Vincent Plymell, Communications Director at the Colorado Department of Regulatory Agencies, who courteously responded to my inquiry)]

Third, Colorado already had 1,227 people enrolled in the Federal Pre-Existing Condition Insurance Plan (PCIP). One would think those people, who tend to have high medical expenses and are willing to pay full freight for insurance, would have been among the earliest to sign up under the Colorado exchange with the potential for subsidized rates.  Thus, some of the 6,001 already enrolled may not represent a reduction in people without insurance to people with health insurance but merely a substitution from one federally created plan to another.

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