The Department of Health and Human Services released updated data today on enrollment on the Exchanges including, for the first time, greater breakdowns on enrollment by several key categories: age, gender, and the metal level of purchase. The result of this long awaited and much requested data is, at first glance, very much a mixed picture. Some of the overall statistics do not look as problematic as some — including me — had feared they might be. But it looks as if there is a very serious potential for large adverse selection problems brewing in a number of states, most notably West Virginia, Mississippi, Maryland and Washington State.
The good news for the ACA from the data
There are three major pieces of good news for those who support the goals of the ACA.
1. The overall gender distribution of enrollees, 54% female, 46% male does not appear on preliminary inspection to be sounding “red alert.” To be sure, the problem may be a little greater than would otherwise be suggested by the aggregated numbers if the middle age group is more heavily female and the oldest group of enrollees more heavily male that the aggregated numbers suggest. And Mississippi is troubling with 61% female enrollment (and for other reasons, see below). But, overall, and if they hold up, these do not appear to be the the kind of numbers that would be way beyond what insurers likely expected or that, standing by themselves, would be devastating to an insurer on an Exchange.
2. Several states have total enrollments and the age distributions that should reduce the possibility of a serious death spiral getting started. New York and California are the two big states doing better than most. Connecticut is doing very well also.
3. The metal tier distribution is 80% for Bronze and Silver policies and only 20% in Gold and Platinum. That’s comforting for adverse selection. A higher proportion of enrollment in the more generous plans would have been a warning sign that enrollment was coming disproportionately from the sick. There’s a footnote on this point later on — we are not out of the woods — but this is definitely better news for the ACA than a distribution of, say, only 50% Bronze and Silver purchases.
The bad news
Just because the ACA is doing better than some had forecast on an overall basis does not mean there will not be very serious problems in some states. Given that the statute is presently unamendable as a practical matter, problems in just a few states can hurt a lot of people. The data released by HHS today shows that there are a number of states in serious trouble.
The table below shows current enrollment in states that appear at first glance to be in significant trouble. (There may be states that are as bad as those shown in the table below; I kind of eyeballed the data, which was not provided in a nice electronic format, to select what appeared to be a problem). I also show the projected number of purchasers, the percentage of current enrollees as a fraction of purchasers, the percentage of “young invincibles” as a fraction of the enrolled population and the percentage of the expensive 45-64 year old age group.
I also construct a “back-of-the-envelope”/quick and dirty “Maelstrom Index” that roughly measures the problems confronting the individual Exchanges in the state. The maelstrom index is calibrated to run from 0 to 1 with a 0 score meaning the state is in excellent shape and a 1 meaning there is an extremely high risk of an adverse selection death spiral materializing. It is not a probability measure. The formula for the maelstrom index is shown at the end of this post.
As one can see, there are a number of states that have serious potential problems. West Virginia is problematic with 66% of its enrollees ages 45 to 64 and only 17% ages 18-34. Almost all experts would concede that this poses serious risk of adverse selection. And the overall fraction of enrollment relative to projections, just 20%, suggests that West Virginia’s insurance pool may be disproportionately populated by the sick. Mississippi is likewise a problem with enrollment only 14% of that projected, 58% in the age 45-64 bracket and, as mentioned above, 61% female enrollment. I have to believe that insurers writing in Mississippi are deeply concerned about these numbers.
Also troubling are the numbers in Texas, Washington State, and Ohio simply because, as an absolute number, there is such a large absolute difference between the number of people projected to purchase and actual enrollment. I’ll speak more about all of these numbers and try to update the chart in the days ahead.
There’s one key piece of data not found in the HHS release today. The number of “enrollees” who have actually purchased policies. If this conversion rate is, as I fear, hardly 100%, the numbers presented today overstate the extent of purchases in the Exchanges and understate the dangers of adverse selection breaking out in many states.
The Maelstrom Index Formula
Max[0, (5*(1.4 - enrollmentPercentage - youngInvinciblePercentage))/7]