Ashley Hentze (left) gets help signing up for the Affordable Care Act from a volunteer in Florida. The government says that 40 percent of the expected enrollees for 2014 must be young and healthy for health insurance premiums to remain affordable.
Relatively few people have enrolled in new health insurance plans since the Affordable Care Act exchanges launched this month. But some health care experts say it's early days yet — and that getting the right proportion of healthy, young new enrollees is just as important as how quickly people sign up.
The Congressional Budget Office projects that 7 million people will buy health insurance for 2014 through the new exchanges, integral to the implementation of the government's new health care law.
Federal officials say that the exchanges have received 700,000 applications since launching Oct. 1. But so far, it appears that most of those being enrolled are signing up for Medicaid, the government health care system for the poor, rather than private insurance plans.
As a result, many health insurance companies say they've received only a trickle of enrollment through HealthCare.gov, the federally run marketplace that serves 36 states and has been plagued by major technical problems.
The Obama administration said Friday that the federal exchange will work smoothly for the vast majority of users by the end of November. But some are concerned about the financial consequences for the government and insurers if enrollment on the exchanges falls short.
Health care expert Larry Levitt, senior vice president for special initiatives at the Kaiser Family Foundation, says the higher numbers of Medicaid enrollees is not surprising, since Medicaid is free, whereas most people will have to pay something for private insurance.
"As soon as you sign up for a plan, the insurer is going to ask you for the first month's premium," Levitt says. "And given that the coverage won't be effective until Jan. 1, anyway, I certainly wouldn't be in a rush to pay money that won't really help me for a couple months."
Getting The Right Demographic Mix
Levitt says he doesn't expect a surge of enrollments to start before mid-November. But if the exchanges' technical problems and bad publicity dampen enrollment significantly, what might be the financial impact for the government? In the short term, Levitt says, it would actually save the government money.
"If fewer people enroll, not only will the government be paying out less in tax credits, but they'll be taking in more money in the form of penalties, because of the individual mandate," he explains.
Uninsured individuals must sign up by March 31 or face a penalty: 1 percent of their annual income or $95, whichever is higher. The penalty rises in later years.
But for insurance companies participating in the exchanges, it's not just a question of whether the exchanges fall short of the 7 million enrollment target for the first year. Robert Zirkelbach, spokesman for America's Health Insurance Plans, the association that represents U.S. health insurers, says the demographic mix of participants is crucial.
"It's not simply the absolute number of people that are covered that's ultimately going to determine whether coverage is affordable," he says. "It's the type of people that decide to purchase."
In fact, to keep the premiums low and make the system work financially, the government estimates that 40 percent of those 7 million people projected to sign up in the first year need to be young and healthy.
"Because if only people who are older and have high health care costs decide to purchase coverage now, that's going to mean that next year, when open enrollment comes around again, premiums may be significantly higher than we see today," Zirkelbach says.
Rising premiums could lead to a downward spiral for the exchanges, because the increases could convince young, healthy people to pay the penalty rather than sign up for insurance that costs significantly more.
Also, since some operating costs for the exchanges, like computer servers and call centers, will be paid with fees on each policy sold, fewer policies could undermine the exchanges themselves financially. And higher premiums would end up costing the government more in subsidies.
Expecting A Rush Before Penalties Kick In
Jonathan Gruber, an economics professor at MIT, helped develop both the Affordable Care Act and a similar Massachusetts health care system back in the 1990s. He says the Massachusetts program was initially delayed for several months and then signed up just 123 people in its first month of operation.
"We have to stop over-reacting to day-to-day noise," Gruber says. "When we passed this law in Massachusetts, I was on the board that implemented it, [and] we got a report every month on how they were doing. That's probably about the right frequency to be thinking about this."
Gruber also says there was a rush of younger, healthy people signing up in Massachusetts as the prospect of a penalty loomed closer.
"What you saw was a big rush, right at the end, among the healthiest enrollees," Gruber says. "The mandate kicking in really seemed to matter. And remember — in this law, the mandate doesn't effectively kick in until April 1."
The Obama administration can only hope that the early problems don't sink the exchanges before they set sail.