Opinion

Outlook for Obamacare Year 2: Underpromise and Overdeliver?

In a Nutshell

Obamacare open enrollment started this month for 2015 coverage. At about the same time, the administration reduced enrollment projections for next year and admitted that its previous estimate of 7.1 million currently enrolled is an inflated figure. So how will 2015 go?

With the Healthcare.gov website… probably a lot better than last year from a systems standpoint. However, an undertaking this gigantic won’t be smooth sailing.

With ACA enrollment… the administration appears to want to underpromise and overdeliver, which is probably a good strategy.

With Medicaid enrollment… the signup period has no end date and the figures thus far have been robust. Expect the same going forward.

All told, Exchange enrollment could ultimately make it to 9 M, the new target enrollment figure for 2015 unveiled by Secretary Burwell this month. With the individual mandate penalty looming around tax time, there could be a rush of enrollments late in the season.

However, expect contradictory headlines for the next year:

First, the Supreme Court will take up Obamacare for a decision to be rendered in early summer 2015. The issue at hand is whether subsidies are lawful for enrollees who sign up via the federally powered exchanges instead of those operated by individual states.

Second, a Republican congress will almost certainly perform Obamacare oversight, meaning an all out legislative attack on the program is likely. Expect hearings and press releases galore starting in early 2015.

Third, House Republicans initiated court proceedings last week over unilateral actions taken in implementing the health care law. The lawsuit focuses on a delay of the employer mandate and on cost-sharing benefits.

 2015 Premiums Look Fine on Paper, Consumers Still Face Cost-Sharing

Premiums will largely look like they did in 2014, according to the plan benefit and premium landscape files released by the government. Specifically, rates are up in the low single digits for 2015 (federal exchange) on average, with the large national insurer rates up closer to double digits.

The Department of Health and Human Services released rates day before open enrollment. The 3-month open enrollment period for the second year of coverage under the Affordable Care Act started November 15. Some experts estimate that about 250,000 new enrollees have signed up as of November 24.

Some consumers, however, will face a higher premium contribution unless they switch plans. That’s because insurers are raising and lowering rates for 2015, and the federal premium subsidy will be rebased in most markets.

If a consumer was in the second-lowest-priced silver-tier plan in the market for 2014 and another plan under prices that product for 2015, the subsidy will no longer cover as much of the premium and the customer will have to pay more out of pocket. On top of that, if their income has changed in 2014 and they don’t provide the insurance exchange with updated information, consumers may receive too large a premium tax credit and will be required to repay the IRS for the excess subsidy. This could sour many current enrollees on the program.

Competitive Pricing, Ample Plan Choice for 2015

The average lowest bronze and silver plans (including 2nd lowest silver) are expected to increase by 3-4%, according to landscape files released by HHS on November 14.

CMS released datasets containing 2015 plan information for the 34 federal exchange states as well as Nevada, New Mexico and Oregon, which are approved as state-based exchanges but are using the federal systems for enrollment. The agency also highlighted a dataset with final 2015 rates for all individual and small group market plans, both on and off the exchanges.

The average premium for a 30-year-old is now $232, compared to $263 last year. The average Silver plan premium is basically flat. The average premium for a 30-year-old is now $283 compared to $284 in 2014. Gold plan premiums are flat as well, with the average rate for a 30-year old at $335 compared to $336 in 2014 (Source: Healthpocket).

CMS states that there will be 25% additional insurers participating in 2015, and more than 90% of consumers will be able to choose from at least three plans. On average consumers will be able to choose from among seven issuers (up from 5 in 2014). Consumers can chose from about forty health plans for coverage (up from thirty-one in 2014).

State rates experience more fluctuation, and various state based exchanges have been functioning better than others. Some states experienced large swings. For example, in Florida, premiums jumped 11%, from $388 in 2014 to $429 for 2015. However, in Mississippi, average 2015 premiums for the second-lowest-cost silver plan declined by 19%, from $509 to $413. In New Hampshire and Georgia, the declines were 15% and 14%, respectively. (Source: Avalere)

There will be ample plan choices for marketplace shoppers. Checks over the last few weeks determined that the website indeed works better, with myriad plan choices (and whether the network is limited or “narrow”) displayed in a user-friendly manner.

New Enrollment Benchmarks Lowered

The administration appears to want to underpromise and overdeliver on enrollment.

On November 10, HHS Secretary Burwell stated that 2015 exchange enrollment is expected to increase only slightly in 2015, and it may take up to 5 years for exchange enrollment to hit steady levels.

Specifically, HHS stated that it expects between 9-10 million to enroll through Obamacare exchanges by the end of 2015 —less than the Congressional Budget Office’s estimates of 13 million. Officials said they believe the ramp-up for exchange enrollment could take longer than the three years CBO assumed.

What does this really mean?

7.1 million are enrolled in Exchanges now (actually, closer to 6.7 million given the error made by government officials including 400,000 dental plan enrollees).

HHS assumes 83% retention, which amounts to about 6 million enrollees renewing for 2015. Therefore, 3-4 million new enrollees would enroll in 2015 for total of 9-9.9 million.

HHS Secretary Sylvia Burwell is aiming for approximately 9 million, as the White House’s real goal, and reaffirmed that figure despite the admission that 2014 enrollment was lower than advertised.

Timeline going forward

It will be hard to ascertain how enrollment is really going until December, when renewals kick-in.

Consumers that take no action this fall will have their coverage automatically renewed in the same or similar health plans. Consumers must select a plan by December 15 to have coverage by January 1, 2015.

Also, despite calls for transparency, the administration has not announced how frequently enrollment and other updates will be provided.

Consumers have until February 15 to sign up for coverage beginning in March.

At about the same time (next March), the Supreme Court will hear oral arguments on the ACA, with a decision to be rendered shortly before the July 4 holiday in 2015. Typically, the high court saves controversial decisions until the bitter end of the term.

There is no enrollment deadline whatsoever for Medicaid — enrollment can take place anytime during the year.

Watch Congress for Obamacare oversight hearings and administration inquiries. Leaders have already discussed an effort to tweak the ACA. With millions covered, outright repeal is unlikely; however, sensible changes could make it through the Congress and even pass muster with the President.

One other wild card: the House Republican lawsuit against the Obama administration. Last week, the GOP stated it would move forward with implementation of the health care law lawsuit that focuses on the delay of the employer mandate, and on cost-sharing benefits.

Buckle up for a bumpy ride. The coverage part of the law is slowly working, but will take some years for a stable insurance marketplace to be achieved. Critics still hope to derail the Obamacare effort, and will work through the courts and legislative process for changes.