Archive | State Health Exchanges

Cost of Generic Drugs Soaring Due to Increased Demand from Obamacare

The pervasive use of generic over brand-name medications was anticipated to be a money-saver, but recently prices are soaring, even up 6,000 percent for some common drugs that were once fairly low-cost. Seventy seven percent of pharmacists said they experienced 26 or more instances of a large increase in the acquisition price of a generic drug within the last six months of 2013.

Generic drugs such as Pravastatin, which treats high cholesterol, and the antibiotic Doxycycline spiked upwards of 1,000 percent in 2013, according to a survey by the National Community Pharmacists Association.

Eighty four percent of pharmacists said price fluctuations prevented them from providing care and remaining in business due to the fact that filling prescriptions resulted in losses when some patients refused their prescriptions because of costs.

The pharmaceutical consulting firm Pembroke Consulting found that within the last year more than a dozen drugs increased ten times their standard rate. Some pharmacists and physicians are pointing a finger of blame at drug companies for the price hikes.

At Costco, for example, at one given time the generic high blood pressure medication Irbesartan was nearly $300 for a 90-day supply of the 150 mg tablet, yet the cost of the same supply of the 300 mg tablet was only $30.

Dan Mendelson, CEO of consulting firm Avalere health, says prices of generic drugs have gone up because demand for them has risen. Since ObamaCare requires all health insurance plans in the exchanges to cover prescription drugs, the new health reform law may increase demand for drugs, causing prices for generic medications to rise even higher in the future.

*Modifed from a article


California’s Obamacare Scandal

Officials say a criminal record should not keep someone from getting a job. “Disclosing the names and criminal records of individuals applying to assist in Covered California’s push to enroll vast numbers in health insurance by March 31, 2014, is likely to discourage participation in this critical program and thus harm the people of California.”

  • Translation: If Californians had the same information as their insurance exchange’s bureaucrats regarding navigators’ criminal records, they’d be scared off — and that would undermine the political goal of high enrollment.

Perhaps Californians should consider themselves lucky that their navigators are required to submit to background checks at all — there is no such requirement in the ACA itself, and in as many as 31 states, no screening is mandated.

In California, however, certified enrollment counselors must pass a fingerprint-based criminal-background check conducted by the state Department of Justice. Applicants with potentially disqualifying convictions undergo individual legal review before a hiring decision is made, and they have the chance to appeal it within 60 days.

The problem is, a background check isn’t worth much unless it’s paired with an assessment process that screens out applicants who pose a risk to the public. In California, an applicant is disqualified only if he or she has “been convicted of or has a pending charge for a crime of moral turpitude that is substantially related to the qualifications, functions, or duties of the job.”

Furthermore, even though applicants are required to self-report prior offenses, records show that 21 prospective certified enrollment counselors who later proved to have criminal convictions failed to do so — and were approved anyway.

The fraud and forgery convictions, though disclosed by the applicants themselves, are the most worrying. Covered California’s Howard tells me, “There isn’t any law that says we should consider financial crimes as something that will follow you through the rest of your life, and therefore you should not have a job. That’s just not appropriate.”

But in some other states’ exchanges, financial crimes such as fraud and forgery are automatically disqualifying. And though no long-term statistics are available, the three-year recidivism rate for people convicted of fraud or forgery in California is a whopping 52.8 percent, according to a brand-new report from the state Department of Corrections and Rehabilitation.

“Somebody with multiple counts of forgery — it is in their nature to commit crime,” says identity-theft expert Robert Siciliano, CEO of “They see crime as the path of least resistance to make a living, and it would only make sense that they would gravitate toward a profession with this kind of access.”


The ObamaCare Carnival of Perverse Incentives

With fewer glitches to deter them, millions of Americans are now logging on to the ObamaCare health-insurance-exchange websites or State exchanges such as Covered California.

  • When they get there, many are discovering some unpleasant surprises: The deductibles are higher than what most people are used to, the networks of doctors and hospitals are skimpier (in some cases much skimpier), and lifesaving drugs are often not on the insurers’ formularies.
  • Even after the government’s income-based subsidies are taken into account, the premiums are often higher than what people previously paid.
  •  Why is this happening? Because the new law gives insurance buyers and sellers perverse incentives to behave in ways that create these problems. Things will only get more out of whack as more and more unhealthy people enter a system designed to be paid for by premiums from healthy people.
  • Under the Affordable Care Act, the benefits insurers must offer are strictly regulated. The law piles on benefits for which everyone must have coverage, whether they could ever use the benefits or not. At the same time, insurers set their own premiums and choose their own networks of doctors and hospitals.
  • To keep premiums as low as possible, the insurers are offering very narrow networks, often leaving out the best doctors and the best hospitals.
  • In September, the Los Angeles Times reported that Blue Shield will have only about half the doctors in its exchange plan as it has in its traditional plan.
  •  The exchange health plans appear to care only about cost. They are offering low fees—sometimes even lower than the rock-bottom fees Medicaid pays health-care providers—and accepting only those providers who will take them.
  • Under the Affordable Care Act, insurers are required to charge the same premium rate to anyone who wants to sign up, regardless of health status; and they are required to accept anyone who applies. This means that to make ends meet they must overcharge the healthy and undercharge the sick.
  • It also means insurers have strong incentives to attract the healthy (on whom they make a profit) and avoid the sick (on whom they incur losses) by, in effect, making their plans less appealing to the sick.
  • Here’s how they seem to be doing it: In structuring the plans they offer on the exchanges, the insurers apparently assumed that the healthy will choose the plan they buy based on its price, while ignoring other features of the plan.
  • It makes sense: If I am healthy why wouldn’t I shop for the lowest price? If I later develop cancer, I can move to a plan that has the best cancer care. By law, these plans will be prohibited from charging me more than the premium paid by a healthy enrollee.
  •  Insurers also assume that people who already are ill or otherwise expect to use a lot of health care pay much closer attention to the cost of deductibles and which doctors and hospitals are in the insurer’s network.
  • To have any hope of balancing their books, insurers must then attract the maximum number of customers who are likely to stay healthy and thus not use so much of the care they paid for, while unhealthy people in effect use more than they paid for. This is why most plans are apparently designed to attract people willing to overlook high deductibles and less access to health care in return for lower premiums.
  • Yet no matter how narrow the provider network, health plans are going to cost more if they enroll more people with above-average health-care costs. And that is what is about to happen.
  • For some years, the federal government and some states have operated and subsidized risk pools. These allowed the chronically ill and other high-cost people who were “uninsurable” to purchase insurance for the same premium healthy people pay. Under ObamaCare, however, the pools are due to shut down and send their enrollees to the exchanges, where the above-average cost of their care will be implicitly borne by higher premiums charged to everyone enrolled in the plans.
  • To make matters worse, cities and towns with unfunded health-care commitments are getting ready to dump their retirees on the state exchanges. Since retirees are above-average age, they have above-average expected costs.
  • Then there are the job-lock employees—people who are working only to get health insurance because they are uninsurable in the individual market. Under ObamaCare, their incentive will be to quit their jobs and head to the exchanges.
  •  In sum: A lot of high-cost patients are about to enroll through the exchanges. This will force up premiums further for all other buyers.

*Modified for a article


Look Out for the ACA’s ‘Double Whammy’

Some small businesses are facing a potential “double whammy” in 2016 from the Affordable Care Act, one expert warns. By 2016 the employer mandate will kick in for companies with between 50 and 100 employees, and they will be moved into the “Small Group Market” for insurance coverage.

  • While they are currently exempt from the employer mandate to provide insurance and not considered part of the “Small Group Market”, small businesses with between 50 and 100 employees will find that all that changes for the worse in 2016.
  • In the Small Group Market, insurers charge higher premiums, not least because, it’s cheaper to insure 200 people under a single contract than it is to insure 40 groups of five under 40 contracts, or 200 individuals.
  • By 2016, those with between 50 and 100 employees will be pushed into the Small Group, where the rates are higher. They need to think about it now, or they will be facing rate shock.
  • While the group had previously been for companies with 50 or fewer employees, the ACA raised the limit to 100 employees — though the increase was put off to 2016 because the law gave states the option to postpone, which they all took.
  • The reason they’re forcing these people into the Small Group Market is to expand the actuarial base and to absorb some of the expected losses. At the same time, Small Group premiums are likely to rise even more because of the benefit requirements in the ACA, which limit deductibles and don’t allow insurers to turn down those with pre-existing conditions.
  • Worse yet states may eventually merge the Small Group Market with the markets for individuals. If states don’t get the enrollment of young people that they expect [to make state insurance exchanges viable], then the likelihood of states combining the Small Group and individual markets will go up.
  • If the two are merged, premiums will likely rise even more. Among other things, individual deductibles tend to be higher, but the ACA caps deductibles.
  • These rules don’t apply to the Large Group Market – and to companies that are self-insured. Virtually every large company in the country is self-insured. They insure them themselves, but work through an insurance company.

*Modified from a article


Moody’s Downgrades Health Insurers on Obamacare Fears

The rocky rollout of Obamacare and the uncertainty surrounding its future has a major credit ratings firm nervous about health insurers. Moody’s Investor Service downgraded its outlook for the U.S. health care insurance sector to negative from stable on Thursday.

  • The move comes just days after contract documents between the Department of Health and Human Services’ and IT firm Accenture details the continuing shortfalls of If changes are not made to the sites’ back-end technology by March, the documents warn the entire health-care system may be in jeopardy.
  • Moody’s Analyst Steve Zaharuk, who authored the report, says it would take positive news regarding the implementation of the Affordable Care Act for the firm to upgrade the industry back to stable.
  • “We would need some positive enrollment numbers, the back-end problems with the exchange fixed and the regulatory environment, where changes are being made ad-hoc [stabilized]. Positive news would help the situation,” Zaharuk says.
  • The true test of how the ACA will impact insurers will come at the end of March, Zaharuk says, when the administration releases its final enrollment report. So far, 2.2 million people have enrolled on both federal and state exchanges, by only 24% are between ages 18-34, falling far below the 2.7 million young and healthy the administration had originally projected for year one of the ACA.
  • Ramifications from the ACA will likely have a ripple effect on the health-care industry for years to come, Zaharuk says. “It’s the law of the land now; a long-term thing. If it works right, it can have positive impacts for the insurance company.”
  • “The first test comes in March when we will see what enrollment looks like, if the back-end issues are fixed, if people are getting access to health care and what the costs and efficiencies are,” Zaharuk says. “IF these things don’t work, it may have a longer and more detrimental effect on the industry as they struggle under the new law.”
  • Fitch Ratings’ outlook for 2014 for the health-care industry is stable, acknowledging challenges for insurers, but claiming the industry is “up for the challenge.”
  • Similarly, S&P has maintained its outlook for the industry as stable, according to Martin Arrick, managing director of the non-profit hospital sector.

*Modified from a article


Exchanges See Little Progress on Uninsured

Early signals suggest the majority of the 2.2 million people who sought to enroll in private insurance through new marketplaces through Dec. 28 were previously covered elsewhere, raising questions about how swiftly this part of the health overhaul will be able to make a significant dent in the number of uninsured.

  • Insurers, brokers and consultants estimate at least two-thirds of those consumers previously bought their own coverage or were enrolled in employer-backed plans.
  •  An Ohio-based insurance broker said he has dismantled about 50 small employer-backed plans, some of which are steering workers to the new marketplaces.
  • An insurance agency that enrolled around 7,500 people in exchange plans, said 65% of its enrollees had prior coverage. Around 10% were dropping out of employer coverage, either because the employer stopped offering its plan or because they could qualify for subsidies on the marketplaces. Fifteen percent had previous individual plans canceled, and 40% decided to switch into coverage bought through an exchange from previous individual plans.
  • The data, based on surveys of enrollees, are preliminary. But insurers say the tally of newly insured consumers is falling short of their expectations, a worrying trend for an industry looking to the law to expand the ranks of its customers.
  • Only 11% of consumers who bought new coverage under the law were previously uninsured, according to a McKinsey & Co. survey of consumers thought to be eligible for the health-law marketplaces. The result is based on a sampling of 4,563 consumers performed between November and January, of whom 389 had enrolled in new insurance.
  • One reason for people declining to purchase plans was affordability. That was cited by 52% of those who had shopped for a new plan but not purchased one in McKinsey’s most recent sampling, performed in January. Another common problem was technical challenges in buying the plans, which 30% mentioned.
  • At Michigan-based Priority Health, only 25% of more than 1,000 enrollees surveyed in plans that comply with the law were previously uninsured, said Joan Budden, chief marketing officer.
  • The trend underscores a central test for the health law, whose marketplaces are meant to steer a broad cross section of new paying customers to private insurers. “One of the intents of the law was to address the uninsured problem in our country,” said David M. Cordani, chief executive of insurer Cigna Corp. Cigna doesn’t yet know what coverage its health-marketplace enrollees previously held.
  • Many health plans and providers are looking for the expansion of coverage to fuel growth. Insurers need to draw healthy uninsured people to offset costs, given that plans can no longer deny coverage to people with pre-existing conditions.
  • Department of Health and Human Services officials have said they don’t yet know the number of people who have signed up for coverage through the exchanges who had insurance at the time of their enrollment.
  • The health law is chipping away at the number of uninsured consumers in other ways. At least four million people are expected to join Medicaid rolls in the coming months.
  • But so far, health-plan executives say, subsidies to buy insurance in the marketplace, and broader changes to the law, seem to be encouraging many already-insured people to seek better rates.
  • In addition, some small companies are cutting back on coverage now that their workers can buy through the marketplaces, insurers and brokers say.
  • At Priority Health, about 25% of health-law customers had employer-supported plans last year, Ms. Budden said, while 50% bought their own coverage last year. Of the latter group, about half are getting subsidies.
  • “I don’t know we’re growing the number of people with insurance here, so much as we’re just adding complexity,” said Geoff Bartsh, vice president for policy at Medica Health Plans in Minneapolis.
  • It isn’t surprising that some percent of new purchasers of private health insurance are people who had insurance before. About 66% of people buying new individual health plans in early 2011 were covered by employer-backed plans in late 2010, according to a Kaiser Family Foundation analysis of federal survey data prepared for The Wall Street Journal. About 20% of enrollees in early 2011 were previously uninsured, the analysis found.
  • There is “massive churn in the individual market, and always has been,” said Larry Levitt, senior vice president at Kaiser. “It wouldn’t surprise me if many [health-law enrollees] were insured in the last year,” he said, but “that doesn’t mean they wouldn’t have ended up uninsured if not for the exchanges.”

*Modified from a article


Another Obamacare provision for employers delayed

The Obama administration plans to delay enforcement of yet another Obamacare provision, according to a New York Times report. This line in the law would ban employers from discriminating “in favor of highly compensated individuals” when it comes to health insurance eligibility or benefits. Effectively, the provision prevents employers from providing their top executives cushy health benefits while low-level employees are given less optimal health insurance options.

  • The IRS will not enforce the provision in 2014 because they simply haven’t yet gotten around to actually writing the regulations that employers must follow, even though the Affordable Care Act was signed into law almost four years ago.
  • Obamacare originally required the IRS to enforce the health benefit “discrimination” ban just six months after the law was passed in March 2010. The Obama administration announced in 2010 that officials needed more time to write the rules, but assured Americans that the regulations would be finalized before Obamacare actually launched.

Years later, the IRS appears to still be grappling with the same questions about implementing the provision. IRS spokeswoman Michelle Eldridge denied in a statement that the agency had approved any new delay.

  • “The IRS has not announced any new or additional information on this issue,” Eldridge said. “The New York Times story refers to IRS Notice 2011-1, which was released to the press on December 22, 2010. That Notice stated that under Public Health Service Act, Section 2716 will not apply until after generally applicable guidance is issued, because the statute requires regulatory detail in order to operate properly.”
  • IRS officials appear to be stymied by the “regulatory detail” of the provision. For the IRS to mandate non-discrimination in health plans for employees with different compensations, the agency must decide how to quantify the value of employer-provided health benefits, how to define “highly compensated officials” and issue a final determination on what constitutes discrimination.
  • The tax agency has a series of scenarios made complicated by Obamacare’s structure that it will have to take into consideration before issuing guidance. Some low-earning employees may opt out of employer-sponsored health insurance in favor of increased subsidies via an Obamacare exchange, for example, while higher executives that aren’t privy to taxpayer subsidies for coverage do not. The IRS has yet to determine whether that employer would be discriminating even if the employer health plan has the same value for all employees.
  • Obamacare’s prescription for violating the ban is a $100 daily excise tax for each individual that was “discriminated” against.

*Modified from a article


Insurers under fire as Obamacare kicks in

New policyholders are having trouble confirming coverage, obtaining ID numbers and getting care. Obamacare’s biggest problem isn’t the troubled or the Covered California website anymore.

Consumers are easing up on criticism of government exchanges and turning their frustration and fury toward some of the nation’s biggest health insurers. All too often, new policyholders say, the companies can’t confirm coverage, won’t answer basic questions, and haven’t issued identification numbers needed to fill prescriptions or get medical care.

  • Day after day, people say, they contact insurance company call centers waiting hours at a time with no response. Meantime, insurers have already taken many customers’ payments for coverage intended to take effect Jan. 1.
  • But without proof of insurance, patients are having to pay hundreds of dollars out of pocket for medications and doctor visits, if they can afford it. Insurance agents say dismal service has become commonplace across many companies.

These industry problems pose the next major hurdle for what’s already been a flawed rollout for President Obama’s signature law. It could further sour public opinion on the overhaul and hamper enrollment efforts through March 31, when the first sign-up period ends.

  • Recent government changes to the law’s implementation and deadlines are impacting the timeline for us to process customer applications, issue billing statements, process payment and issue coverage ID cards.

Alan Sager, a health-policy professor at Boston University, said the insurance company fiascoes are another barrier to overcome after the government website problems. “There’s equal opportunity for incompetence by the public and private sector in administering such a large new program,” he said. “People are deservedly angry and resentful.”

Some insurers have begun to apologize this week, acknowledging a lackluster response amid an unprecedented surge of applicants for the individual insurance market. Nationwide, more than 2 million people enrolled in private health plans by the end of last year, either through or state-run marketplaces.

  • Industry officials say the disastrous launch of the federal exchange and the ever-changing rules from the Obama administration have complicated their job and contributed to the backlog.

“Health plans have gone above and beyond to protect consumers from disruptions caused by the ongoing problems with” and some state exchanges, said Robert Zirkelbach, spokesman for America’s Health Insurance Plans, an industry group. “The last-minute changes to deadlines and rules have made the process more complicated and time-consuming.”

But some consumers think big insurers had plenty of opportunity to get ready. “Insurance companies of this size should have been far better prepared. They knew it was coming,” said Katherine Kokko, 34, a public-health consultant in New Hampshire.

She easily signed up for an Anthem Blue Cross Blue Shield policy through on Dec. 20 and soon after paid her $325 monthly premium. But after waiting on hold more than 10 hours in all this week, a company representative said she didn’t have an identification number. As a result, Anthem wouldn’t authorize physical therapy she needs after knee surgery last month.

These problems are particularly acute for families with ongoing medical needs, such as cancer treatment, pregnancy and other chronic conditions.

Bill Strong of Santa Barbara has a 6-year-old daughter who requires 24-hour care for a rare disease, spinal muscular atrophy. The family’s previous plan was canceled because it didn’t meet all the requirements of the Affordable Care Act. The family enrolled with Blue Shield of California on Dec. 23 and paid its $1,000 monthly premium for a Platinum plan.

But Strong said he hasn’t heard anything from the company despite two weeks of phone calls. Strong already paid for one prescription himself, and his daughter is scheduled to get a $4,000 injection Friday. Also, his wife is nine months pregnant.

“The company is not set up to handle the volume coming through,” Strong said. “It’s creating a lot of stress on us we don’t need.” Blue Shield of California apologized to customers for its “unacceptable” performance on its Facebook page this week.

“While we anticipated and planned for increased traffic, the sheer volume of enrollments has swamped all major health plans,” the San Francisco insurer said.

WellPoint, the nation’s second-largest health insurer and parent of Anthem Blue Cross, has drawn the ire of many customers in California and 13 other states where it’s selling policies on and off government exchanges.

The company said it responded to more than 1 million customer calls over two days last week, equal to the amount it typically receives over an entire month. It said it has more than 1,000 employees answering calls.

Insurers say the inability of many people to enroll through in October and November, coupled with deadline extensions to get Jan. 1 coverage, created an unexpected bottleneck of applications in late December.

The wave of policy cancellations for millions of Americans this fall added to the upheaval, and industry officials have also complained about lost or delayed delivery of enrollment files from the federal and state exchanges.

Blue Shield of California said it is still getting applications for Jan. 1 coverage from the state exchange.

A spokesman for said “we have fixed most of the issues that may impact a consumer’s enrollment with a health plan.”

In light of the lingering problems, California’s exchange extended the payment deadline to Jan. 15 for coverage starting Jan. 1, and some insurers across the country have granted even more time.

Some consumers are demanding partial refunds on January premiums that were paid weeks ago. Jeffrey Morgan, a marketing consultant in Lakewood, said Anthem Blue Cross rejected his refund request after waiting on the phone more than two hours Thursday.

Morgan has paid his January premium of $1,200 for his family’s coverage, but the company erroneously sent him a member ID card showing his coverage isn’t in effect until March 1.

“I enrolled well before the deadline and paid well before the deadline and I need prescriptions that are critical to my healthcare,” Morgan said.

Even insurance agents say they can’t get through to the companies to assist their clients. This whole law is a gift to insurance companies, they owe us good customer service.

*Modified from a article


Hiccups persist in California health insurance exchange

Covered California is still sorting through paper applications for health insurance starting Jan. 1, and some people are having trouble related to invoices, coverage confirmation or online payments.

Paperwork and computer glitches are still tripping up some eager consumers who are seeking coverage through California’s insurance exchange and its 11 health plans.

  • On Monday, the Covered California exchange said that all the applications it received online for coverage starting Jan. 1 have been sent to participating insurers, but that it is still sorting through an unspecified number of paper applications for that time period. In light of that delay, last weekend the state exchange extended the payment deadline for January premiums by nine days to Jan. 15.
  • A week into the new year, some people are still waiting to get an invoice or confirmation of coverage. Other enrollees have run into problems trying to pay online and long hold times when calling to get answers from their insurer or the exchange.

A surge of applicants in late December has created bottlenecks at government-run exchanges and insurers nationwide trying to implement the Affordable Care Act. They are trying to make it legal for the heath care benefits when it comes to skin care and beauty products. One example is “how to tighten your neck?”

Overall, more than 400,000 Californians have signed up for private health plans so far through the state exchange. About 100,000 of those people enrolled in the final four days before the Dec. 23 deadline to have coverage in effect Jan. 1.

“We did receive a flood of applications before the deadline, so we are working at top speed to process all those and get them through the pipeline,” exchange spokeswoman Anne Gonzales said. “We understand people are waiting, and we are going as quickly as possible on our end.”

She said the exchange had to follow up with some applicants to get additional documentation before sending those files to insurers. Gonzales said she didn’t have a figure for how many applications for Jan. 1 coverage are still pending.

Insurers said some problems are inevitable because enrollment deadlines were repeatedly extended to help more people sign up in time for Jan. 1 coverage. The original deadline was Dec. 15, and Covered California was letting people finish applications as late as Dec. 27 after several extensions.

Insurers “are making every effort to ensure people are enrolled if they have made a good-faith effort,” said Nicole Evans, a spokeswoman for the California Assn. of Health Plans. “This kind of volume at one time in the individual insurance market is unprecedented.”

San Francisco resident Marin Perez, 29, tried for days to pay his $211 monthly premium to Anthem Blue Cross, a unit of industry giant WellPoint Inc. He and other consumers have said the company’s online payment system wasn’t working in recent days.

So, Perez said, he called the company, waiting on hold twice Friday for more than two hours apiece with no success. “It was a complete nightmare,” said Perez, content manager for a technology start-up. He hasn’t had health insurance since leaving his previous job about three months ago.

“It seems the private sector should be a little more savvy about managing this,” Perez said. “I thought many times, just forget it, I’m going to take my chances” without insurance. Perez said he was able to pay Monday only after contacting an Anthem official directly.

An Anthem spokesman said the company’s online payment system has gone down “intermittently” and the company “continues to increase its stability.”

Los Angeles resident Sandy Ragan, 60, was able to pay her premium for a Bronze plan with L.A. Care Health Plan on Dec. 9. But she’s frustrated because she hasn’t received a membership card or any other information from her insurer. She said she has asthma and high cholesterol and would like to see a doctor using her new benefits.

A spokeswoman for L.A. Care said it takes consumer complaints seriously and it is always looking to improve its service.

Healthcare giant Kaiser Permanente said exchange enrollees can make medical appointments and get care even if they haven’t yet received an invoice or paid their first premium. Anthem Blue Cross said its enrollees needing care can file a claim and get reimbursed later, subject to the terms of their policy.

Modified from a article


Obamacare may get sick if young Americans don’t sign up

Now that more than 2 million people have signed up for private insurance plans created by President Barack Obama’s healthcare law, a crucial next check-up for the new marketplace will be to see how old customers are.

  • Early data from a handful of state exchanges shows the administration needs more young adults to sign up in the next three months to help offset costs from older enrollees and prevent insurers from raising their rates.

Critics of Obama’s Affordable Care Act say the market won’t attract enough young people to keep it financially viable, putting more pressure on government funds to compensate for any insurer losses.

  • Data from seven states and the District of Columbia, which are running their own marketplaces, show that of more than 200,000 enrollees, nearly 22 percent are 18 to 34 years old, according to a Reuters analysis.

The administration had hoped that over 38 percent, or 2.7 million, of all enrollees in 2014 would be 18 to 35 years old, based on a Congressional Budget Office estimate that 7 million people would sign up by the end of March.

“The whole insurance relationship is counting on them signing up,” said Dale Yamamoto, an independent healthcare actuarial consultant. “Otherwise rates will have to increase.”

The picture from the initial state data is likely to change, since it mostly includes people who enrolled only through November, before a year-end surge of sign-ups for people wanting coverage effective Jan 1. Many experts speculate the early enrollees were more likely to be in urgent need of coverage, and therefore more likely to be older or sicker.

A recent survey by The Commonwealth Fund, a healthcare research foundation, found that 41 percent of those who had shopped at the various state marketplaces by the end of December were ages 19 to 34, up from 32 percent from an October survey.

One marketplace with current data, the District of Columbia, said on Friday that of the 3,646 enrollees in private plans through Thursday, about 44 percent are young adults.


  • The Affordable Care Act, popularly known as Obamacare, prevents insurers from charging people more if they have a health problem. Age is one of the few factors that can affect the price, with insurers allowed to charge up to three times more for a 64-year-old than someone in their early 20s.

But the healthcare costs for a 64-year-old on average are nearly five times as much as a 21-year-old, according to a study of claims from three large insurers Yamamoto conducted for the Society of Actuaries.

“The more that the marketplace is able to attract a broad mix of enrollees including the young and healthy … the more that costs will be sustainable and premiums will be more affordable,” said Robert Zirkelbach, spokesman for America’s Health Insurance plans, a trade group for insurers.

Other factors may be as crucial, if not more, in determining the stability of the new market, including the health status of enrollees, regardless of their age, and how that lines up with what individual insurers had projected. But those details will only become clearer later in the year based on the medical claims filed by the newly insured, making age the best early proxy about whether the market is sustainable.

The Centers for Medicare and Medicaid Services, which oversees the marketplace for 36 states, has yet to provide any demographic data about enrollees. CMS is expected to release an enrollment report later this month.

Data may come sooner from insurers as they discuss their recent financial performance with investors in the next few weeks. Humana Inc said on Thursday that the mix of enrollment in its marketplace plans were likely to be “more adverse than previously expected.

  • But healthcare experts say insurers need a better mix of enrollees than seen in the early data.

“If a quarter or more of the enrollees are young adults, I would think that’s an encouraging sign, particularly for the first half of the open enrollment period,” said Larry Levitt, senior vice president at the Kaiser Family Foundation healthcare think-tank.

By the end of March, “if it’s lower than that, I think there would be some cause for concern,” Levitt said.

Levitt and colleagues at Kaiser analyzed a scenario that they deemed “worst case” in which young adults represented 25 percent of enrollees. They found that costs then would be about 2.4 percent higher, but insurers would retain a very slim profit margin. As a result, the Kaiser authors projected the companies would raise premiums by a commensurate amount, but not enough to destabilize the market.

Using the same data as Kaiser but different assumptions, Seth Chandler, a law professor at the University of Houston who specializes in insurance, said costs would be 3.5 percent higher, should only 25 percent of enrollees be young adults.

  • “If we see fewer than 30 percent of the enrollees being in that 18-to-34 age bracket, that’s a warning sign that there are problems,” Chandler said. “If the demographics come in poorly, insurers are going to lose money.”

Chandler is a skeptic of the healthcare law and writes a blog called “ACA Death Spiral.” Such a spiral is thought to occur if insurers facing higher costs raise premiums, so only very sick people buy coverage, leading to even higher premiums with the pattern continuing until the insurance market either disappears or shrinks to the point that it is not sustainable.

*Modified from a Reuters article