November 10, 2015 | Rosemarie Day

Open Enrollment #3 – Third Time’s the Charm?

Screen Shot 2015-11-10 at 12.54.31 PM

Click graph to enlarge.

November 1st marked the beginning of the third open enrollment period under the Affordable Care Act (ACA), and this one has launched with fewer problems than the first two.  Is the third time the charm?  It depends on what we’re measuring.  Let’s take a look.

ENROLLMENT:  RUNNING TO STAY IN PLACE

As we saw last year, public exchanges have to work hard just to maintain their enrollment base.  During the 3 month open enrollment period, they need to both attract new customers (and get them to pay), as well as retain existing ones.  During the rest of the year, exchanges face customer attrition due to changes in circumstances (people leave the exchange if they get jobs with employer sponsored insurance or if they qualify for Medicaid).

Taking these factors into account, Secretary Burwell is projecting a modest increase in enrollment nationwide:  from 9.1 million at the end of 2015 (which has attritted down from 9.9 million last June) to somewhere in the range of 9.4 million to 11.4 million by the end of 2016.  (There are far more sign-ups expected, as many as 14 million, but then there is projected attrition throughout the calendar year). (See graph above. Note: none of these projections include SHOP (small business) enrollments – that program is still not the primary focus of most public exchanges.)

To attract new customers, the federal government is targeting its outreach to 5 major metropolitan areas that are served by Healthcare.gov:  Newark, Houston, Dallas, Chicago, and Miami.  And President Obama remains very engaged – from speaking to outreach workers to launching a national contest to see who can get the most enrollments, he and his administration are working to get more people covered.  But is it enough?

At the state level, funds are limited and carriers are filling in the gaps with their own advertising.  It’s an uphill battle.  Surveys show that many of the consumers who would qualify for subsidies still don’t know that they do.1

Renewals are key, but public exchanges need to increase their renewal rates.  They may be able to do this thanks to technology improvements that make it easier for consumers to reenroll this year.

Finally, the penalty for not buying insurance is increasing this year, but it may not motivate significant new purchasing of health insurance because it won’t affect consumers until April of 2017 – this makes it feel abstract.

Expected Result:  Modest increase in enrollment.

AFFORDABILITY:  “YOU’D BETTER SHOP AROUND!”

There’s an overall increase in premiums in the exchanges again this year, but the average increase in the popular silver tier is modest.2  And, consumers continue to have choices since most carriers have stayed in the exchanges.3

  • For the 84% of exchange consumers who receive subsidies, they will continue to see more affordable net premiums due to the subsidies.  Some will even see a decrease in premiums once subsidies are netted out, though it may require switching plans.4
  • For exchange consumers without subsidies, there are still some new, low-cost options available for many consumers if they are willing to switch plans.

Expected Result:  Some consumers will shop and switch plans to keep their renewals affordable.

CAN EXCHANGES DELIVER?

Well into their fourth year of existence, public exchanges are still working to stabilize their technology and operations.  This year they have the added challenge of needing to trim back their spending.  (In 2015, the ACA requires state exchanges to be fully self-sustaining since the generous federal start-up funds are drying up.)

With fewer dollars to work with, exchanges are targeting their outreach efforts and trying to make renewals for existing customers as easy as possible.

On the technology front, many improvements have been made during the past year:

  • At the federal level, Healthcare.gov is touting its numerous customer-facing enhancements which should make it easier for consumers to shop and renew their plans.
  • At the state level, many have raced to implement improvements, but one more is shifting to the federal IT platform (Hawaii joins Oregon, Nevada and New Mexico) and others are evaluating what will be their best long-term solution due to sustainability requirements.5

Ironically, one of the few state exchanges that got the technology right, Kentucky, is now facing the possibility of being dismantled.  The governor-elect, Republican Matt Bevin, has said that Kentucky doesn’t need its own exchange and that the feds should run it.  We’ll see what happens once he takes office.  Among other impediments, there is a one-year notice period and many one-time transition costs to moving to the federal platform.

Expected Result:  Exchanges will deliver a better consumer experience but won’t have sufficient resources to bring in lots of new customers.

BOTTOM LINE

Exchanges will deliver in 2016, but enrollment growth, if any, will be modest.  I think we’ll see exchanges maintain the enrollment gains made in 2015 and some will likely surpass them.  The key factors:

  • There continues to be strong carrier interest and a good deal of competitive pricing.
  • The value of the subsidies is strong, but many consumers still don’t know about them.
  • The penalty is increasing, but it’s an abstract concept since it won’t hit them until April 2017.

In sum, the fundamental value proposition of exchanges for individual consumers (competition and choice) continues to be there for millions of consumers, but the subsidies still need to be promoted.

FOOTNOTES:

  1. Only 46% of uninsured surveyed were aware of subsidies. http://www.commonwealthfund.org/publications/issue-briefs/2015/jun/experiences-marketplace-and-medicaid
  2. A Kaiser analysis shows an average 3.6% premium increase for the 2nd lowest priced silver plan for a 40 year old non-smoker across 26 major cities, which translates to a .7% decrease once subsidies are netted in. http://kff.org/health-reform/fact-sheet/analysis-of-2016-premium-changes-in-the-affordable-care-acts-health-insurance-marketplaces/
  3. A recent McKinsey analysis of all 50 states shows that of the 333 incumbent carriers in public exchanges, 50 exited the market, but there were 31 new entrants.  http://healthcare.mckinsey.com/sites/default/files/McKinsey_2016-individual-rate-filings.pdf
  4. The same McKinsey analysis of all 50 states shows that 2/3 of subsidy-eligible consumers will see a net increase in the lowest cost silver plans (average of $154/year or $13/month when subsidies are factored in) and 1/3 of subsidy-eligible consumers will see a net decrease in the lowest cost silver plans (average of $126/year or $10/month when subsidies are factored in). http://healthcare.mckinsey.com/sites/default/files/McKinsey_2016-individual-rate-filings.pdf
  5. There are still 17 state-based exchanges (including DC). http://kff.org/health-reform/state-indicator/state-health-insurance-marketplace-types/#map