During the first year of Obamacare’s implementation, the individual insurance market became less healthy while the uninsured and Medicaid populations became healthier, according to a new analysis.
A Health Affairs data analysis released Wednesday underscores the often stated observation that the Affordable Care Act has brought sicker, more expensive enrollees into the individual marketplace while healthier people have tended to resist enrollment.
The analysis uses information in the National Health Interview Survey, conducted by the National Center for Health Statistics. It was conducted by officials from the Agency for Healthcare Research and Quality, the Congressional Budget Office, and Social and Scientific Systems.
“Our analysis suggests that people newly taking up coverage in 2014 were less healthy than the broader uninsured population in the previous year, before the implementation of the ACA’s insurance expansion provisions,” the report concludes.
The new study also reinforces the notion that this development shouldn’t be a surprise. The ACA added multiple new regulations to the insurance industry that were aimed at making it easier for the sick to obtain coverage. It expanded access by prohibiting insurers from discriminating by health status, meaning the sick and the healthy can enroll in the same plans and pay the same rates.
As a result of these changes, the number of uninsured adults fell by 5.7 million between 2013 and 2014, the years examined in the Health Affairs analysis. The number of people with individual insurance increased by 3.6 million.
“Before 2014, insurers in most states were not required to offer coverage to all applicants, and they were allowed to exclude coverage of preexisting conditions for those who were offered a policy,” the report reads. “The ACA prohibits these practices, and thus it may not be surprising that new enrollees in 2014 appear to have increased the average morbidity of the individual market since 2013.”
Another reason for a sicker insurance market population, the report suggests, is that previously uninsured people gained coverage and then were diagnosed with conditions.
Notably, the analysis did not find significant changes in health care utilization among the individually insured between 2013 and 2014. One possible reason, it suggests, is relatively the high levels of cost sharing on the individual market. For example, a 2015 Health Affairs study found out-of-pocket costs for prescription drugs under a typical Obamacare silver plan are twice as high as they are in the average employer-sponsored plan. This could deter some ACA enrollees from using health care.
Obamacare also expanded Medicaid, which resulted in 3.1 million more people enrolled in the program. Unlike in the private insurance market, the Medicaid population appears to have become healthier between 2013 and 2014. This was true in all states, with no significant differences between expansion and nonexpansion states, the analysis found.
The reason, the authors theorize, is that people newly eligible for Medicaid under the ACA are healthier on average than existing Medicaid enrollees, who were often eligible because they were had very low incomes or are disabled.
The third group examined in the report was the uninsured. Although Obamacare requires people to have insurance through its individual mandate, enrollment in ACA from the uninsured population has been slower than expected. The analysis found that the uninsured population became healthier between 2013 and 2014, suggesting that the sickest members enrolled in health insurance first. This, in turn, brought up the average health in the uninsured population but also made the individual marketplace sicker, on average.
The findings hold good news for the future. Healthy people are by definition cheaper to insure, which is why the administration and insurers are so keen to enroll them in the individual marketplace. The marketplace has endured a series of bad headlines, with several insurers pulling out of the market citing losses and many instances of double-digit premium increase requests for 2017. It’s become generally understood that insurers initially underestimated how sick the previously uninsured were and did not charge enough to cover the costs of insuring them.
But if the remaining uninsured are healthier than insurers’ new enrollees, it stands to reason that the individual marketplace will likely get healthier as more of the uninsured population purchases coverage. If that happens, the average individual market enrollee will become cheaper for insurers to cover, driving down both insurers’ losses and consumers’ costs.
“We observed better health status among the uninsured in 2014 compared to that group in 2013, which suggests that people who were uninsured in 2013 and took up coverage in 2014 were somewhat less healthy than the average uninsured person in 2013,” the report reads.
“In turn, this suggests that people who took up coverage in 2015 and take it up in subsequent years after being uninsured the prior year will likely be healthier and possibly have lower average health expenditures than those who became newly insured in 2014,” it added.