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Some important thoughts on ObamaCare's latest enrollment claim:
ObamaCare’s high-profile meltdown during its implementation period rivaled the best of Hollywood’s divas and former child stars. The fledgling program collapsed spectacularly on the national stage after downright amateur website glitches and millions of insurance cancellations which all but impeached whatever shreds of President Obama’s credibility remained. Despite all this, the Obama administration is actually claiming victory after announcing that 7.1 million individuals have allegedly “enrolled” in exchange-based insurance plans that were created under the Affordable Care Act (ACA). Some, such as Princeton professor and CNN contributor Julian Zelizer, have gone so far to as to say that this news means that the ObamaCare debate is over:
“ACA will continue to face political attacks and implementation challenges, but the enrollment level virtually ensures serious debates over repealing ACA are now dead.”1
After four years of some of the most intense political discourse in recent memory, this may seem like a bold and precipitous assertion; and that would be because it is. Considering the intricacy of the ACA and its countless limbs reaching into nearly every part of the economy, merely taking the White House’s pronouncement of 7.1 million exchange sign-ups at face value and waving it as the ObamaCare victory flag is painfully simplistic, especially coming from the Ivy-League ivory tower. It is also fairly obtuse to claim that the entire ObamaCare debate is over when the debate over specifics of the 7.1 million sign-ups has barely begun.
With that, let’s take a closer look at that 7.1 million figure and Professor Zelizer’s claim as a whole.
Why 7 million? The 7 million figure was commonly represented as the number needed to make the insurance risk pools associated with the exchange-based plans created under the ACA sustainable. This is completely incorrect. The truth is that the 7 million target was simply the number of individuals the Congressional Budget Office (CBO) projected would sign up for ObamaCare exchange plans by the end of March 2014. They soon revised this figure down to 6 million after the storm of glitches that plagued the federal and many of the state online exchanges. However, the White House stuck with the 7 million target. Regardless, the 7 million milestone does not mark the edge of the woods and holds no significance beyond bolstering the credibility of the CBO.
Where is the number 7.1 million coming from? Every month since open enrollment on the exchanges began, the Office of the Assistant Secretary for Planning and Evaluation (ASPE) within the Department of Health and Human Services (HHS) has released a report detailing cumulative exchange usage and enrollment for both federal and state-managed exchanges. Best guess is that the White House is referencing a statistic in the report labeled “Marketplace Eligible Individuals Who Have Selected a Marketplace Plan.” This appears to be the closest thing to “enrollment” that is reported by HHS. The ASPE report for October through the end of February, which was published March 11, reported that a little over 4.24 million had “selected a marketplace plan.” We’ll likely have to wait a few more days for ASPE to tally March enrollment to see if this is the source of the White House’s figure.
If this is where the White House is pulling their data from, and in all likelihood it is, then it tells us something else that suggests that our debate over the worth of the ACA is far from over.
What does 7.1 million actually mean? The administration is likely reporting 7 million sign-ups based on the number of people who “have selected a plan” as stated in an unreleased ASPE report. What the ASPE report does not state, however, is what qualifies as having “selected” a plan. The report contains no information relating to how many people have actually paid for their “selected” plans and therefore actually activated their coverage. Other independent reports are claiming that as high as 20 percent of those that have selected or enrolled in a plan have not paid their first premiums and hence remain technically uninsured. Should this be true, actual enrollment may be much closer to 5 and half million as opposed to 7.1 million.
Who are the 7.1 million? Let’s give the administration the benefit of the doubt on enrollment and assume all 7.1 million have paid their premiums; as for the purposes of evaluating the efficacy of the Affordable Care Act the question of “how many?” is not nearly as important as “who are they?”. Unfortunately we seem to only have a concrete (albeit, wet concrete) answer from the administration on the former. The reason why it is important to know who these 7 million individuals are is the same reason people mistakenly emphasized reaching the 7 million goal in the first place. There is tremendous concern that the risk pools being created by these insurance exchanges are unsustainable. This gets at the heart of the main problem with ObamaCare.
Many incorrectly see the law as healthcare reform. It’s not. It’s health insurance reform. The difference here is key. Proponents of the law perceived there to be a problem in the United States where insurance costs forced millions to go without coverage. There is certainly a kernel of truth to this assertion, although cost is far from the principal reason uninsured Americans are without coverage.2
Yet instead of going after the cost of healthcare as a whole, the core cause of expensive healthcare insurance, the ACA instead focuses almost entirely on tinkering, to put it delicately, with the insurance market. Insurance, whether it is car, home, life, or healthcare, works when many people pay into a pool at a low rate and only a few people draw on it at a high rate. The unique problem with ObamaCare is that the extra-market mechanisms it uses to suppress high costs may actually force prices higher. These mechanisms, such as the subsidies offered to those that purchase plans on an exchange, rules that force companies to accept clients, and regulations that fix prices to specific ratios, run the risk of attracting mostly older and less healthy people, that predominantly draw on insurance, to the exchange based plans. If this proves to be the case, the risk pools will be unsustainable, forcing insurance companies to dramatically raise rates across their entire customer base in order to cover the costs. This is quite antithetical to the whole “affordable” idea of the Affordable Care Act.
(Some will point to the risk corridor program contained in ObamaCare as a failsafe in the event this scenario plays out. The program is designed to force the federal government to reimburse insurance companies if their cost increases exceed certain thresholds. However the risk corridor program is temporary through 2016 and only partially reimburses insurance companies if their costs go up. Regardless, the program is simply a cost shift. Americans will be stuck holding the bag for the backfired cost-suppression mechanisms regardless, whether it’s through higher premiums, higher taxes, or more debt.)3
Of course, what we don’t know is the exact risk that the new sign-ups pose, as that is largely based on medical histories which we simply aren’t privy to. What we do know, nevertheless, suggests that the administration could be in real trouble here. Again, the ASPE and its monthly reports lend us a clue. While the healthy versus sick statistics still escape us, ASPE has tracked age demographics of those that are using the exchanges. In order to ensure that the risk pools are properly balanced enough to account for the number of older and less healthy Americans that are likely swarming towards subsidized coverage, the insurance companies need to sign up large amounts of those that typically do not draw on the system to sign up for coverage as well; namely young people. The enrollment data from October 2013, the beginning of open enrollment, through the beginning of March, suggests that the exact opposite has happened.
So far, only 25 percent of those “Marketplace Eligible Individuals Who Have Selected a Marketplace Plan” are between the ages of 18 and 34. On the other hand, individuals between the ages of 45 and 64 accounted for 53 percent of sign-ups. In fact, individual sign-ups by those 55 and older outpace the entire 18 to 34 demographic, at 30 percent to 25 percent respectively.4 In short, the risk pools are heavily weighted towards Americans that are likely to draw on insurance at a much greater rate.
Concluding thought. Again, Professor Zelizer, echoed by much of both the left and West wings, claims that the sign up over 7 million people is a call for cloture on the Affordable Care Act’s efficacy and future. This is a grossly premature assertion. We cannot be completely sure of the exact stability, or instability, of the risk pools. The data simply isn’t available to the public at this time as it is largely contingent on the medical histories of those that have signed up, whatever that means, for ObamaCare exchange-based plans. What the theory and the available data does tell us, however, is that we can be sure that there is still a real and potentially fatal flaw with the ObamaCare system that is in no way alleviated by the fact that over 7 million individuals have signed up for exchange-based insurance.
So long as serious issues such as these persist, serious debate over the fate of the Affordable Care Act should, and shall, too.