ACA Update: Why Seven Million is Just a Number
As a tidal wave of “Obamacare meets deadline” columns pour into our cyber universe, “Seven million” becomes the temporary flash flood. Seven million represents the number of sign-ups the Congressional Budget Office (CBO) originally predicted in their estimates of the Effects of the Affordable Care Act on Health Insurance Coverage in May 2013. The projected signups are only for Qualified Health Plans (QHP’s) on the public health insurance exchanges, and they don’t include renewed grandfathered health plans or other private insurance signups.
The process of signing up for health coverage through public exchanges is a three-stage process. First, potential enrollees select a plan based on desired level of coverage and relative cost. An application is sent to the insurance provider. Second, the insurance provider reviews the application and determines the final premium. Finally, the potential enrollee is notified of acceptance and required to pay the first month’s premium. Only after this first payment, is the enrollee officially covered by health insurance.
As of March 31st over 7 million people have signed up for health insurance on the exchanges, the first stage of the process. Health and Human Services Secretary Kathleen Sibelius told reporters that insurers claim 80 to 90% of exchange consumers have paid their health insurance premium. But, we can’t know specifically how many people have paid the premium because data are not yet available to the public. Sibelius’ comments, among others, contain an element of speculation.
The more important question regarding the 7 million sign-ups is why the administration originally chose it as the goal. What makes 7 million sign-ups an optimal target and how does it play into the long-term rollout of the law? Are seven million sign-ups more of an enrollment estimate and less of a criterion for success? Let’s break it down by the numbers.
First we need to look at the target population and calculate those who could enroll for coverage on the exchanges. Among the 313 million Americans as of 2012, 46 million were uninsured and 16 million purchased insurance directly on the individual market, totaling 62 million potential exchange enrollees.
Based on our eligibility estimates, about 16 million of those are newly eligible for Medicaid. Another 6 million are low-income people in states that did not expand Medicaid, which leaves them currently ineligible for Medicaid or federal subsidies at the exchanges. We believe that it will be impossible for this “coverage gap” group to pay for premiums without federal assistance and therefore will remain uninsured.
That leaves about 40 million potential exchange enrollees:
Uninsured (46M) + Individual Market (16M) – New Medicaid (16M) – Coverage Gap (6M) = 40 Million
Seven million constitutes about one in six potential enrollees. Success is a relative term, especially given the laws major delays, exchange issues and general disapproval throughout the process. The test will be in 2015 when insurers review claims and set premiums for the following plan year. Keeping premiums low is dependent on having enough healthy enrollees to reduce average costs and offset the higher costs associated with enrollees in poorer health. If enrollment remains low, insurers may have to raise premiums even higher in the individual market.
For more information on our estimates and a comprehensive look at the ACA, please see our study, How the Affordable Care Act Affects Your Health Insurance Costs.