With the completion of open enrollment for individual health insurance, the focus on Obamacare shifts from how many people signed up for coverage under the Affordable Care Act to who signed up. The latter will be a primary indicator for the cost of health insurance next year.
Surge of Enrollments
Since open enrollment began, 7.1 million people reportedly enrolled in qualified health plans through the exchanges setup pursuant to the Affordable Care Act. That number continues to climb as last-minute enrollees finish up their applications during the enrollment grace period. Due to system errors and long wait times to enroll, the government granted consumers extra time to complete their health insurance applications if they attempted to sign up before the March 31 enrollment deadline.
As someone who works for a nationwide private exchange, GoHealth, I can tell you -- the surge in enrollments was incredible. From the beginning of March to the end of March, the number of visits to our online exchange at GoHealthInsurance.com and calls to our licensed advisors increased tenfold. The demand was real and it exceeded our expectations. In fact, our Benefits Center in Chicago's Merchandise Mart continues to buzz with activity, signaling that Americans are taking advantage of the extra time to enroll.
Millennials Sign Up at a High Rate in March
Turns out, people procrastinated -- especially young people. Carriers and exchanges across the country reported that millennials were the fastest-rising group of enrollees. We saw the same trend at GoHealth as the average age of enrollees on our platform decreased 8 years from November to March.
In general, 18-34 year olds are considered healthier and have lower health care costs than their older counterparts, representing a lower risk for the insurance carriers. Given that the economics of insurance depends on the risk pool, many eyes will fixate on the number of young, healthy enrollees who are needed to keep costs manageable for health insurance carriers. More important than age is health. Older Americans in good health can help keep costs in check the same way a healthy millennial can.
The Risk Pool's Impact on 2015 Premiums
Insurance carriers are somewhat in the dark about their customers' health status because underwriting is no longer allowed during the application process. Insurers are now reviewing claims for the first few months of the year to help them assess the risk of their customer base. They hope to find a high percentage of healthy enrollees to offset the cost of treating people who are unhealthy. Because insurers are now required to use 80 percent of premiums to pay for policyholder benefits, only 20 percent of premiums are left for profit and expenses such as overhead and labor. If during the year, policyholders file more claims than insurers expected, then the cost of the unexpected claims may exceed the 80 percent of premiums allocated for policyholder benefits, causing insurers to raise premiums next year in order to maintain their 20 percent margin.
As Expected, First Glance Shows a Sicker-Than-Average Population
A review of pharmacy claims, which are faster to process than medical claims, give a preliminary look at the health care needs of consumers who enrolled in health plans during open enrollment. According to an analysis of pharmacy claims released from Express Scripts, a leading pharmacy benefit management company, new enrollees are less healthy than average. The company looked at claims in January and February and found that new enrollees are more likely to use prescription pain medication and expensive specialty drugs than people who are enrolled in a commercial plan.
This analysis is only for the first two months of the year, and insurers anticipated people with health problems would enroll first. We know that many young people waited until March to enroll, so the hope is that late enrollees will change the current trend and help prevent rates from increasing next year.
Setting Rates
Insurance carriers are supposed to submit their rates for 2015 health plans in spring or early summer, but WellPoint, the largest commercial insurance carrier in the exchanges, already announced an early prediction. Kevin Goulet, executive vice president for WellPoint's Commercial specialty business, said WellPoint expects a "double-digit plus" rate increase for all of its carriers next year. He said the rate hike is likely because he expects government payments to insurers to decrease in 2015 under the Affordable Care Act. Some analysts believe WellPoint is playing it safe with its prediction until it gets a better sense of its risk pool.
Most leading insurers like Aetna and Humana have not publically announced estimated rates for next year. They will be required to submit their rates to the government over the next few months and provide justification for increases above 10 percent. The government will review insurers' proposed rates over the summer. Final rates will be set by fall ahead of the next open enrollment period Nov. 15, 2014 through Feb. 15, 2015.
While numbers during the first open enrollment are very encouraging, the insurers' rates for 2015 will also be a key indicator that pundits and politicians alike will look to in determining the success of Obamacare.