Tag: death spiral

Premium increases could be in Georgia’s future

On Monday, the Department of Health and Human Services (HHS) finally shed some light on the age demographics of those who have selected health plans on the state and federal Obamacare exchanges.

While much attention has been paid to the overall numbers, the age demographics — specifically, the number of 18 to 34 year-olds — of those who are signing up for health insurance coverage may be more important.

Last summer, before the launch of the exchanges, HHS Secretary Kathleen Sebelius said that the goal was to enroll 7 million people into health plans, of which 3.3 million were expected by the end of 2013. That overall open enrollment goal includes 2.7 million people (or 38% of all enrollments) needed to come from the 18 to 34 year-old age demographic, sometimes called “young invincibles.”

Based on the HHS numbers, Georgia isn’t on pace to meet its overall enrollment goal. Per an August 2013 memo, the Centers for Medicare and Medicaid Services (CMS) anticipated that 144,840 enrollments in Georgia by year’s end and 204,000 through March 31, 2014.

In reality, however, just 58,611 individuals from the state have selected a health plan, of which 26% are from the coveted 18 to 34 age demographic. Thirty percent (30%) of Georgians who selected a plan were 34 and under.

Many will say that this is a byproduct of a glitchy website. Others will surmise that it’s a lack of interest. Some will suggest that it’s some combination of the two. Whatever the reason, the actual numbers haven’t met expectations. The silver-lining for supporters of the law is that the numbers did jump in Georgia.

Now, a couple of things to keep in mind. HHS is using the “selected plan” term as some sort of a substitute for enrollment. But before anyone can be counted as an enrollment, they have to pay their first premium. There is no indication of how many of these “selected plans” are translating into actual enrollments in Georgia.

Another point is that, though Georgia is performing slightly better than the national average, the number of 18 to 34 year-olds is still relatively low.

Insurers need a large, diverse risk pool with young and healthy people to pick-up the costs of older and sicker enrollees. If insurers don’t meet target age demographic number, they could be forced to raise premiums for plans available on the exchanges before the 2015 open enrollment period.

It’s unclear what percentage of the market share the administration expected this age demographic to compromise of enrollments in Georgia, but the HHS numbers are concerning, although not necessarily an indication that the state’s insurance market is headed for the dreaded “death spiral.” For example, Bill Custer, a professor at Georgia State University, told GPB News that the 30% market share of those 34 and under is consistent with past rates.

In December, however, the Kaiser Family Foundation — which supports Obamacare — estimated that missing the 38% to 40% age demographic target (it varies by estimate) would lead to premium hikes, presenting two different scenarios.

“Under [the first] scenario, young adults would represent 33% of individual market enrollees instead of 40% as in the potential market,” wrote Larry Levitt, Gary Claxton and Anthony Damico. “Taking into account the allowed three-to-one variation in premiums due to age, we find that costs (health care expenses plus overhead and profits) would be about 1.1% higher than premium revenues.”

“Under [the second] scenario, young adults would represent 25% of enrollees, substantially less than their share of the potential market,” they continued. “[T]his is likely a worst-case scenario, since the expectation is that older and sicker individuals are more likely to buy first and that younger and healthier people will tend to wait until towards the end of the open enrollment period (which concludes March 31, 2014).”

Though they dismissed the prospect of a “death spiral,” the three researchers did concede that insurers would “likely raise premiums in 2015 to make up the shortfall.”

As noted by Kaiser, the line is that young and health people will enroll in droves toward the end of the open enrollment period. But, as Philip Klein explained, they’ll have represent a significant portion of enrollments over the next three months to hit the expected share.

Now, some health policy analysts, including those at the Kaiser Family Foundation, have dismissed the demographic numbers in recent days. Conveniently, they now claim that the worst-case scenario isn’t a big deal.

Obviously, it remains to be seen whether the “selected plan” numbers translate into enrollments and what percentage of them are young people. But the early warning signs of higher premiums in 2015, though perhaps not a “death spiral,” are there.