- The number of people signing up for Obamacare has varied considerably by state and is far below the level of penetration the industry typically needs to create a sustainable risk pool.
- Vermont signing up 75% of the exchange eligible and Iowa only signing up 20%––insurers typically want to see 75% sign-up.
- This year’s results were not encouraging with the states having the best first year enrollment stalling out in 2015––California, Washington, and New York.
- Many carriers are worried that the Obama administration is not going to follow through on its promises to pay off most of a carrier’s losses through the “3Rs” reinsurance program and decided not to wait another year before hiking their rates.
- In December Congress passed legislation requiring that one element of the PPACA 'bailouts'—the risk corridors—be revenue neutral after the administration last year promised it would not be capped.
- S&P recently reported that, “The ACA risk corridor will not receive adequate monies from insurers with profitable exchange business to pay insurers that have unprofitable exchange business.”
- Then there is the permanent and revenue neutral risk adjustor element of the program. Health insurers with the worst claims experience end up getting subsidized by the ones with the best experience. The problem is that the government won’t do this calculation on the last year’s business until after the health plans have to submit the next year’s rates making next year’s rate calculation dicey at best.
- Over the years, it has been common to see one insurance company in the same market dramatically price its business differently than another. Some have more data, some are more patient, some are willing to under price to grab more market share, some have more experience in this market niche, and some just screw it up.
- Health plans are still dealing with incomplete data. Really, they are looking at just one year of claims experience (early 2014 to early 2015) for a brand new book of business in which the enrollment has not been stable. As most healthcare consultants will tell you, three years are typically necessary to give accurate projections.
- What has concerned many actuaries is how the market penetration for Obamacare slowed considerably in year two in the states with the best first year enrollment results. Almost all of the states recorded a second year growth rate of 10% to 20%. A 20% growth rate might sound good, but to hit the original Obamacare enrollment targets in this first three-year ramp-up, we needed to see enrollment double; not grow by a fifth.
Source:
Robert Laszewski - the president of Health Policy and Strategy Associates, LLC, a policy consulting firm based in Washington, D.C. His full article is published at
Forbes.
