2016 Obamacare Outlook
One of the more Obamacare fluent reporters just emailed me a set of questions regarding the 2016 outlook for Obamacare.
I thought I would share my responses with you:
According to early CMS data, 38% of exchange enrollees are under age 35. Is the risk pool beginning to stabilize?
It's too soon to know if the pool is beginning to stabilize. First, the administration's announcement that 38% of the pool is below age 35 is disingenuous. They are counting all of the children that show up on the rolls with their families. They did not give us the far more important age 18-to-35 number.
Second, the overall subsidy eligible exchange penetration stood at about 35% at the end of 2015. Ideally, Obamacare needs to about double its penetration of the eligible to assure a balanced pool of the sick and the healthy.
Then of course, we always see these big enrollment numbers being announced by the administration only to see the block shrink dramatically by year-end.
So, it will really be a year before all of the dust settles on the 2016 enrollment and we really know what the claim levels are relative to the premiums being charged.
If rates increase too much in 2017, will those young people jump ship?
I worry more about the really poor take-up rates for the healthy people who have not signed up in the 200% of federal poverty level and above brackets than I worry about the percentage of the young who have signed up. Way too much emphasis is put on this age 18-to-35 statistic. Yes, they are more often healthy but under Obamacare the youngest pay one-third the premium of the oldest. We really need the healthy to sign up in much bigger numbers, that have so far been holding out, more than we need the young.
Will the higher tax penalty for not having coverage prompt more young and healthy people to enroll?
I am sure it will help--come March when we see who ends up paying their first month premium we will know how much.
What about people who don't qualify for a subsidy?
This is the great untold-story. About half of the individual market doesn't qualify for a subsidy. We already know the take-up rate for subsidized population in the 300% of the federal poverty level to 400% of the federal poverty level is dismal. Those who get no subsidy are really taking these higher premiums and deductibles on the chin. A great many insurance agents regularly email me with their market experiences.
Here is one such comment I got last week: "I have had more people this year weeping and overwhelmed at the astronomical premiums, even WITH subsidies and cost sharing. Many say, 'But that's a mortgage payment."
Do you think UnitedHealth will leave the exchanges?
I think their dramatic announcement surrounding their very real and huge losses late last year was more about negotiating favorable terms in the future than getting out of what is now the entire individual health insurance market.
I have said for some time that the Obama administration by itself could fix much--but not all--of what is wrong with the Obamacare insurance business model if they would just get out of denial and get to work on some practical solutions. My sense is that is what United was really trying to get them to do with their pretty direct threat.
The carriers understand this and I am certain there are some pretty direct conversations now going on with the administration behind the scenes especially over the ongoing "special enrollments."
Will other carriers get out of Obamacare?
The real decisions will be made after the election when the health insurance companies see the 2016 claim results and whether or not there is any hope this can be fixed by the new Congress and President. Even if the claims levels stabilize at these high premium levels it is clear this is not working for those above 200% of the poverty level. No one in the industry, including me, thinks Obamacare will be repealed. But it needs major repair. The only question is who will do it?
Will we see new entrants?
If a start-up like Oscar can be successful we could get a new wave of players. The co-op fiasco proves you can't enter this business without a viable business plan and being well capitalized.
Will provider-based plans continue to grow?
This question is tied to the whole issue of provider risk-taking as a viable business model. So far, these structure haven't proven to be any more successful that in the last iteration in the late 1990s. But time will tell and I really hope we can get it right this time and finally find a viable way to get away from fee-for-service reimbursement.
What do providers need to compete with the established carriers?
Literally all of the health insurance company competencies. The co-ops proved what can happen when you don't get the list of these things right from the beginning. Provider management by itself is far from enough.
What do you see as the future for the co-ops left standing?
Grim. The AP recently reported that the average loss in the first nine months of 2015 was $20 million per co-op with none of them in the black. This is just a really bad business plan and they are undercapitalized.
Saying they are in trouble because Republicans cut their risk corridor payments is like saying a derelict boat sank because of a bad storm.
Will the small business SHOP exchanges continue to struggle?
Yes, employers value their broker/agent relationship. Here's a flash--brokers have value to their clients.
How will the presidential election impact exchanges?
It depends upon what the new Congress looks like and who is President. A Republican Congress with a Republican President is a world of difference from a Democratic Congress and a Democratic President. Not to mention who that President is. A divided government would create another set of possibilities.
Bottom line: Obamacare is not sustainable politically or financially in its current state if only because of how far short it is falling for those subsidy eligible people over 200% of the poverty level and for the 50% of the individual health insurance market that does not get a subsidy.
If Obamacare can increase its penetration from the December level of 35% of the eligible group by as much as 30% in this 2016 open enrollment, the administration and their supporters will be heralding the "huge success" of Obamacare come March. But if they did that they would still only have 45% of the eligible group and I doubt the penetration above 200% of the poverty level would still be anything other than dismal.
I look for lots of spin on the part of the administration and their supporters as the 2016 open enrollment comes to an end.
But I don't see a result that in the end really changes the game.
During the election season Democrats can't admit Obamacare is broken and Republicans can't admit it won't be repealed.
The big question that will remain is: Who will fix Obamacare?
I thought I would share my responses with you:
According to early CMS data, 38% of exchange enrollees are under age 35. Is the risk pool beginning to stabilize?
It's too soon to know if the pool is beginning to stabilize. First, the administration's announcement that 38% of the pool is below age 35 is disingenuous. They are counting all of the children that show up on the rolls with their families. They did not give us the far more important age 18-to-35 number.
Second, the overall subsidy eligible exchange penetration stood at about 35% at the end of 2015. Ideally, Obamacare needs to about double its penetration of the eligible to assure a balanced pool of the sick and the healthy.
Then of course, we always see these big enrollment numbers being announced by the administration only to see the block shrink dramatically by year-end.
So, it will really be a year before all of the dust settles on the 2016 enrollment and we really know what the claim levels are relative to the premiums being charged.
If rates increase too much in 2017, will those young people jump ship?
I worry more about the really poor take-up rates for the healthy people who have not signed up in the 200% of federal poverty level and above brackets than I worry about the percentage of the young who have signed up. Way too much emphasis is put on this age 18-to-35 statistic. Yes, they are more often healthy but under Obamacare the youngest pay one-third the premium of the oldest. We really need the healthy to sign up in much bigger numbers, that have so far been holding out, more than we need the young.
Will the higher tax penalty for not having coverage prompt more young and healthy people to enroll?
I am sure it will help--come March when we see who ends up paying their first month premium we will know how much.
What about people who don't qualify for a subsidy?
This is the great untold-story. About half of the individual market doesn't qualify for a subsidy. We already know the take-up rate for subsidized population in the 300% of the federal poverty level to 400% of the federal poverty level is dismal. Those who get no subsidy are really taking these higher premiums and deductibles on the chin. A great many insurance agents regularly email me with their market experiences.
Here is one such comment I got last week: "I have had more people this year weeping and overwhelmed at the astronomical premiums, even WITH subsidies and cost sharing. Many say, 'But that's a mortgage payment."
Do you think UnitedHealth will leave the exchanges?
I think their dramatic announcement surrounding their very real and huge losses late last year was more about negotiating favorable terms in the future than getting out of what is now the entire individual health insurance market.
I have said for some time that the Obama administration by itself could fix much--but not all--of what is wrong with the Obamacare insurance business model if they would just get out of denial and get to work on some practical solutions. My sense is that is what United was really trying to get them to do with their pretty direct threat.
The carriers understand this and I am certain there are some pretty direct conversations now going on with the administration behind the scenes especially over the ongoing "special enrollments."
Will other carriers get out of Obamacare?
The real decisions will be made after the election when the health insurance companies see the 2016 claim results and whether or not there is any hope this can be fixed by the new Congress and President. Even if the claims levels stabilize at these high premium levels it is clear this is not working for those above 200% of the poverty level. No one in the industry, including me, thinks Obamacare will be repealed. But it needs major repair. The only question is who will do it?
Will we see new entrants?
If a start-up like Oscar can be successful we could get a new wave of players. The co-op fiasco proves you can't enter this business without a viable business plan and being well capitalized.
Will provider-based plans continue to grow?
This question is tied to the whole issue of provider risk-taking as a viable business model. So far, these structure haven't proven to be any more successful that in the last iteration in the late 1990s. But time will tell and I really hope we can get it right this time and finally find a viable way to get away from fee-for-service reimbursement.
What do providers need to compete with the established carriers?
Literally all of the health insurance company competencies. The co-ops proved what can happen when you don't get the list of these things right from the beginning. Provider management by itself is far from enough.
What do you see as the future for the co-ops left standing?
Grim. The AP recently reported that the average loss in the first nine months of 2015 was $20 million per co-op with none of them in the black. This is just a really bad business plan and they are undercapitalized.
Saying they are in trouble because Republicans cut their risk corridor payments is like saying a derelict boat sank because of a bad storm.
Will the small business SHOP exchanges continue to struggle?
Yes, employers value their broker/agent relationship. Here's a flash--brokers have value to their clients.
How will the presidential election impact exchanges?
It depends upon what the new Congress looks like and who is President. A Republican Congress with a Republican President is a world of difference from a Democratic Congress and a Democratic President. Not to mention who that President is. A divided government would create another set of possibilities.
Bottom line: Obamacare is not sustainable politically or financially in its current state if only because of how far short it is falling for those subsidy eligible people over 200% of the poverty level and for the 50% of the individual health insurance market that does not get a subsidy.
If Obamacare can increase its penetration from the December level of 35% of the eligible group by as much as 30% in this 2016 open enrollment, the administration and their supporters will be heralding the "huge success" of Obamacare come March. But if they did that they would still only have 45% of the eligible group and I doubt the penetration above 200% of the poverty level would still be anything other than dismal.
I look for lots of spin on the part of the administration and their supporters as the 2016 open enrollment comes to an end.
But I don't see a result that in the end really changes the game.
During the election season Democrats can't admit Obamacare is broken and Republicans can't admit it won't be repealed.
The big question that will remain is: Who will fix Obamacare?
