January 27, 2015 by Tony Novak
We are still a few weeks away from the end of 2015 health insurance enrollment period but I think the results reported by HHS so far indicate that the Obamacare exchanges in most or all states will fall short of their enrollment goals. After all of the heavy public spending in development of technology and high-profile advertising, the public health insurance exchanges are clearly not a cost-effective way to expand health coverage.
Meanwhile, other off-exchange insurance sellers are reporting solid and increasing enrollments. United Healthcare, Aetna and others recently reported stronger than expected results but did not break down the source of new customers. Why the difference? This post explores some of the possible reasons.
1. Lack of penalty enforcement. In change after change, the risk of being penalized for not having insurance are lower than ever. As of last week, nobody had actually paid a penalty for not having health insurance. The latest IRS announcement suggests that tax filers can avoid a tax penalty by applying for an exemption at the time of tax filing. The IRS predicts that about 4 million will owe the penalty for 2014. I wouldn’t be surprised if most of those simply “check the box” on their tax return to avoid paying it. IRS has already stated that it has no way to check. Some professional tax return preparers already report that in the first week of 2014 tax filing some uninsured customers have refused to pay the penalty. It seems that with many rule changes week after week, the message coming from Washington is that “we are backing off ACA enforcement because we really do not want to make anyone angry with us”.
2. Expansion of limited benefit insurance. President Obama’s HHS administration did a 180 degree turnaround in its strategy on limited benefit insurance from persecuting and discouraging its use to recently proposing new regulations that would expand its use. We know that the insurance buying consumers and businesses like this off-beat type of health insurance but how will this impact the future of Obamacare?
3. Telemedicine. The fastest growing health benefit is not even a part of Obamacare. Telemedicine is popular because it is cheap and easy to use. Consumers like it. Obamacare should be so lucky.
4. High deductibles and co-payments. On almost a daily basis, I hear consumers call Obamacare “worthless” because of high out-of-pocket expenses. Doctors report that middle-income patients simply are not coming into their offices as often anymore. Instead, the doctors’ appointment books are filled with newly insured Medicaid patients who do not have to worry about the out-of-pocket expense. It seems clear that consumers want to use their insurance benefits but don;t think they can afford to do so.
5. Overall price. Consumers still don’t think that 9.5% of total household income (or even 8% of total household income under anticipated revisions) for health insurance and another 5% for out-of-pocket health expenses is a reasonable or attainable level of spending given the financial squeeze already facing most American households. We don’t have to look far on social media to find comments where consumers find health insurance rates to be laughable (but in a very sad way).
My health insurance exchange support at Freedom Benefits and the online enrollment support through OnlineNavigator.org has served consumers in all 50 states and DC for both the Obamacare and the private commercial exchanges since the launch of PPACA reforms. The only remarkable observation I’ve made this year is that the ratio of quotes to enrollments for Obamacare plans is a factor of about 10 times less favorable than for non-qualified health insurance plans. What this tells me is that consumers who run a quote are ten times more likely to find the value offered by the non-qualified plan o be acceptable compared to the perceived value of a qualified Marketplace insurance policy.