Bad Omens For Obamacare

Many small ones have popped up recently. First up, Adrianna McIntyre explains why ACA enrollees might have to switch plans next year:

The federal subsidies used to offset the cost of insurance are based on income, but they’re also pegged to the second-cheapest silver plan on each state exchange, which is called the “benchmark plan.” When people choose something cheaper than the benchmark plan (the cheapest silver plan, or one of the bronze plans), they will spend less money out of their own pocket on the insurance premium. If a person chooses a plan that’s more expensive than the benchmark plan, he’s responsible for the extra cost.

But annual changes to insurance premiums aren’t uniform across plans. That means the “benchmark plan” can change from year to year — with financial consequences for those with subsidies. These consequences will be most acutely felt by low-income enrollees.

Speaking of subsidies, Sarah Kliff wonders how states will pay for the upkeep of their exchanges when the federal money runs out next year:

The Affordable Care Act provided federal grant funding for states to get their new web portals up and running.  The Obama administration doled out $4.6 billion in grants to states launching their own marketplaces. But Obamacare also requires state exchanges to become self-sustaining by the start of 2015. That means every state exchange that will operate next year now needs to figure out how to pay their bills. …

“There won’t be any big pot of federal money,” says Elizabeth Carpenter, a director at health research firm Avalere. “When you think about being able to run an exchange without the federal backstop, it will take awhile to forecast and figure out what money is needed.”

Next, Adrianna McIntyre warns that the next ACA open enrollment period is at the worst time of year:

Open enrollment for 2015 will last from November through February. The Obama administration probably picked late fall for open enrollment because that is when Medicare and most employers permit insurance enrollment changes. But between Thanksgiving and Christmas, late fall is also incredibly stressful, both financially and emotionally.

According to a new study in Health Affairs, people’s capacity for decision-making is stretched especially thin during the lead up to the holiday season. And when people are stressed, behavioral economists have found that decision-making is done with a sort of tunnel vision: people focus only on their most pressing short-term problems, sidelining long-term issues.

Suderman digs into another new study, from Kaiser, that “suggest[s] the potential limitations of Obamacare’s coverage scheme”:

It’s not a precise instrument: More than 40 percent of exchange enrollees were already insured, suggesting that while Obamacare is expanding coverage to the uninsured, it’s also resulting in a fair amount of subsidized coverage going to people who already had coverage (the vast majority of exchange beneficiaries got subsidies). Digging a bit deeper into the survey also hints at the difficulty in measuring who, exactly, counts as previously uninsured. If someone had health insurance up until a month prior to getting new coverage under the law, should that person count as uninsured? Probably not. What about six months before? Or a year before? These questions are legitimately difficult to answer.

Kaiser’s survey finds that the majority of previously uninsured lacked coverage for two years, and that 45 percent reported not having coverage for five years. Which means that more than half of the previously uninsured were covered at some relatively recent point.

Jason Millman looks at other surveys that don’t bode well for Obamacare:

Just how much will people buying their own coverage shop around for a better deal on health insurance year-to-year? By creating a marketplace where plans have to compete for business under the same rules, Obamacare is supposed to facilitate the shopping experience. Some recent studies throw cold water on that idea, though.

Just 13 percent of seniors enrolled in Medicare’s prescription drug program changed plans during the annual enrollment period, according to an October 2013 Kaiser Family Foundation survey that reviewed the first five years of program enrollment. Those facing the highest premium increases were the most likely to switch plans — anywhere between two and four times of the average rate of all enrollees who switched plans. Still more than two-thirds of enrollees who faced the highest premium increases stuck with their plans.

And last but not least, Lanhee Chen argues that “data published in the Wall Street Journal suggest that [the possibility of an ACA death spiral] may not be so far-fetched after all”:

At its base, the data show that people insured through the law’s exchanges have higher rates of serious medical conditions. Of the enrollees who have seen a doctor or other health-care provider in the first quarter of this year, 27 percent have significant medical problems, including diabetes, cancer, heart trouble and psychiatric conditions. That rate is substantially higher than that for patients in nonexchange market plans over the same period. And it’s more than double the rate of those who were able to hold onto their existing individual market insurance plans after President Barack Obama was forced to allow them to keep them.

This outcome should not surprise anyone. The law’s one-size-fits-all regulatory regime, which requires insurers to offer coverage to all comers and prohibits pricing of coverage based on an applicant’s health status, was bound to increase the number of relatively sicker people purchasing insurance through the exchanges. Moreover, Obama’s executive action, which effectively allowed many people who had individual market plans to remain in them through at least 2016, bifurcated the insurance markets such that healthier people remained in the plans they already had, while relatively sicker patients were left to acquire coverage through the Affordable Care Act’s exchanges.

Some of the bad risk in the exchanges has been offset by the enrollment of relatively healthy people who acquired coverage because of the law’s generous subsidies. Yet the numbers make clear that the exchanges remain a haven for those who may consume more medical services than others.