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 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.
Healthcare experts say many young healthy people may sign up only at
the end of enrollment on March 31 to avoid paying the law's penalty
for not having health insurance.
A FACTOR OF PRICE
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.
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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.
The penalty for not buying insurance increases significantly by
2016, which should bring in more young and healthy holdouts over
time.
Not everyone, however, is significantly concerned about the age of
Obamacare enrollees this year.
Linda Blumberg, senior fellow at the Urban Institute's Health Policy
Center, said that Obamacare's protections for insurers in the first
few years means the program has time to get the demographics sorted
out.
"That all combines to make me much less worried about the mix for
this year," Blumberg said. "I don't think we have to get a certain
percentage of enrollees to be below age 35 or this thing crumbles."
(Reporting by Lewis Krauskopf; editing by Michele Gershberg and
Andrew Hay)
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