Obamacare's Medicaid Mess?

Could yet another problem for Obamacare be buried within the limited enrollment data reported so far?

Some suggest the answer to this question is "yes." In particular, they say that the proportion of individuals enrolling in Medicaid through the health insurance exchanges could mean trouble ahead for Obamacare. If they're right, the real trouble could be for some health insurers.


Mess in the making?
Unfortunately, the federal government has yet to release any detailed information about enrollments through the website. All we know so far is that around 700,000 applications have been received through the federally operated exchange that serves 36 states plus the other 14 state-run exchanges. That number doesn't indicate, however, how many individuals actually enrolled in health plans.

We do know, though, detailed numbers from several of the states operating their own exchanges. And those details show a consistent trend: higher numbers of people are enrolling in Medicaid instead of private health insurance plans. 

New York reported that 64% of exchange enrollees signed up for Medicaid. In Kentucky, 82% of the total number of individuals enrolling through the state exchange qualified for Medicaid. Those figures were relatively low, though, compared to Washington, where 87% of all enrollees were for the hybrid federal-state health program.

Why does this matter? If these trends hold true for the other states, it could mean that much higher numbers of young people are enrolling in Medicaid instead of private insurance. These insurance plans rely on plenty of younger, healthier Americans to sign up. If there aren't enough of them, insurance companies take losses in the near term and have to increase their rates over the longer term.

Of course, the higher rates are, the less likely that healthy individuals will buy insurance. If this scenario continues unchecked, it could result in what is known as a "death spiral," where insurance becomes too costly for most individuals.

No problem?
On the other hand, worrying about any problems such as these certainly seems premature. Open enrollment through the Obamacare exchanges extends through the end of March -- and we're not even past the first month yet. There are also still many unknowns about how enrollment is going in the other states.

The Congressional Budget Office projected that Medicaid enrollment would be higher than private insurance enrollment. According to the CBO's estimates, around 9 million additional people would sign up for Medicaid for 2014 with 7 million enrolling in private plans. That's 56% for Medicaid, which isn't all that far below what New York reported,  although admittedly well lower than Kentucky's and Washington's rates.

There are at least a couple of reasons that could be behind the initially higher numbers of Medicaid enrollees. For one thing, several states specifically targeted citizens eligible for Medicaid with the expanded income criteria supported by Obamacare.

Another important factor is that Medicaid is free -- unlike private health insurance plans. It makes sense that individuals who found out they could get coverage under Medicaid with no cost would immediately enroll, while others who had to pay for private plan coverage would be more likely to think about their possibilities before opting to enroll.

Winners and losers
These caveats are valid, but it's not too early for investors to at least contemplate the consequences of what could happen if current Medicaid enrollment trends persist. Let's first look at the potential winners.

With its acquisition of Amerigroup last year, WellPoint  (NYSE: ANTM  )  stands to be a significant Medicaid winner. The company's 4.3 million Medicaid members puts it at the top of all insurers in terms of Medicaid enrollment. Medicaid accounts for 12% of WellPoint's total enrollment -- also the highest of the major publicly traded insurers. 

Aetna (NYSE: AET  ) is another company that should benefit from increased Medicaid enrollment. Medicaid currently makes up more than 9% of Aetna's total membership -- the second-highest rate of the big publicly traded health insurers. At least five of the states where Aetna operates are expanding their Medicaid programs under Obamacare, including California, Illinois, and Pennsylvania.

UnitedHealth Group (NYSE: UNH  ) could join Aetna and WellPoint in claiming victory. It boasts the second-highest total Medicaid enrollment, with over 3.9 million members. However, because of its larger overall membership size, Medicaid makes up less than 9% of the total.

What about possible losers if Medicaid enrollment keeps healthier individuals from signing up for private Obamacare plans? WellPoint could fall into both winner and loser brackets. The company is participating in state exchanges everywhere it operates. Without enough healthy enrollees in those states, WellPoint could incur significant underwriting losses.

It's too early to know whether Obamacare will truly have a Medicaid mess on its hands. Watch as more states report detailed enrollment numbers and especially for when the federally operated exchange numbers come out. If Medicaid continues to be a high percentage of total enrollment, look for Aetna and UnitedHealth to be the clear winners.

Clearing up Obamacare confusion
Obamacare seems complex, but it doesn't have to be. In only minutes, you can learn the critical facts you need to know in a special free report called Everything You Need to Know About Obamacare. But don't hesitate; because it's not often that we release a FREE guide containing this much information and money-making advice. Please click here to access your free copy.

Read/Post Comments (9) | Recommend This Article (2)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On October 29, 2013, at 7:15 PM, sagehopper wrote:

    If the only people who are signing up are the ones that will be heavily subsidised,,even free for them...and nobody that would pay into it problem there..

  • Report this Comment On October 29, 2013, at 7:24 PM, quacker wrote:

    if you sign up you lose the right to protest this stupidity,dont sign up and say it is a protest protected under the freespeech act

  • Report this Comment On October 29, 2013, at 10:10 PM, CrazyDocAl wrote:

    The problem with Obamacare is it's too complicated. There's too much that can go wrong and almost everything has to fall perfectly in place for it to go right. The GOP has been busy making sure everyone knows that the Dems own this. 2014 will be a mixed bag but I expect that 2015 will see a steep rate increase once they have the 2014 data. I plan on moving out of the healthcare market before that time.

  • Report this Comment On October 29, 2013, at 10:44 PM, altmd71 wrote:

    The whole premise of Obamacare is to make it so bad that people will clamor for a single payer system which will break this country. He is going to destroy private health insurance companies and subsequently destroy private heath care.

  • Report this Comment On October 29, 2013, at 11:26 PM, Dadw5boys wrote:

    Federal Government Info combined with State Info on the Consumer ? The Federal Government has different records than the State and they have to remember who they told which lies too ! So when the Web Site kicks back with Questions about Employment and the States Computers do not have that same info the people freak out ! A lot of Welfare Fraud could be uncovered here. That makes you wonder what Red States have to hide not allowing the Federal Government Access to those State Medicaid Records !

  • Report this Comment On October 29, 2013, at 11:55 PM, ToObamascare wrote:

    This article is typical lame Obamascare. It starts out saying that more people than expected are being found eligible for Medicaid. Duh! The CBO only has data on the current income for people, not their assets. You don't qualify for Medicaid if you have practically any assets. They thought there were only 9M poor on the basis of current income. This is the problem folks, there are many more genuinely poor people than government data suggests. Also, the article suggests that an individual has a choice btw Medicaid and paid private, but that's not how it works. If you are poor with low income and no assets, you have to get Medicaid because Obamacare does not want genuinely poor people depleting their scare resources for basis coverage; that makes sense. People who have assets are then directed to the exchange for a private policy. Of course this pisses people off who are hiding their assets, but if they are just boldface liars, they should probably just be keeping their mouth shut.

    Then the article says that MOST individuals will have their premium go up if more than expected "choose (wrong!)" Medicaid. This could only be theoretically true for upper income people (no subsidies). Hey guys, get over it, MOST people are not rich in this country, MOST people are poor. They will get subsidies that completely cancel out any rate increases by the insurance companies. The article is total bull because it operates completely on false premises.

  • Report this Comment On October 30, 2013, at 12:56 AM, rcrawford41 wrote:

    i dont think it right to be forced to get health insurance im not getting insurance im healthy and dont need drugs or the goverment to tell me i need insurance fu off obamacare not right to force your health care on anyone that dont want it

  • Report this Comment On October 30, 2013, at 8:13 AM, peckbill wrote:

    We must begin today. All members of the House of Representatives come up for re-election in November 2014. All REPUBLICAN MEMBERS OF THE HOUSE OF REPRESENTATIVES share responsibility for the government shutdown that occurred on October 1, 2013, especially Tea Party members (49 members of the House) who’s action mirror the Fascists of Hitler’s days in power. This shutdown cost the United States of America over fifty one million dollars. We, the people, must demonstrate, by voter participation that we, the people, are in charge of the United States of America. We, the people, MUST NOT vote for any Republican to fill a position in the United States of America House of Representatives. You can add five Democratic sympathizers to the list, they are Reps. Ron Kind (Wis.), Jim Cooper (Tenn.), John Barrow (Ga.), Jim Matheson (Utah) and Mike McIntyre (N.C.). Remember what these people have done to American people in the past few years. On 1 October 2013 the House Republican/Tea Party members of the Congress shut down the United States government because they did not get their way and cut 150 million people out of available medical care by eliminating the Patient Protection and Affordable Care Act (the GOP voted more than 40 times but failed every time); this law was approved by the full Congress in 2010 and signed by the President; in 2012 the GOP asked the Supreme Court to review the law for Constitutionality; the Supreme Court headed by a GOP President appointee told Congress and the American people that the Law was Constitutionally correct; these actions would expose America to foreign threats and economic poverty; the GOP does everything it can to make sure the poor remain poor and the middle class is reduced to poverty. They could not accept that the President of the United States of America was black. Look at other crippling changes supported by the same GOP/Tea Party members, 1) in 2006 they enacted a law requiring advanced money payments that has crippled the U.S. Postal Service to the extent that it is now threatened with enormous cuts and restrictions on services, 2) they enacted laws and made adjustments in federal and state operations that greatly cripple women rights and basically tell women, you are a second class citizen, you don’t count, and 3) they fights, every day, to cut much needed services such as Social Security, retirements, including military capability, that makes America appear to all foreign countries as a downward spiraling Nation without leadership, 4) they demand drastic reductions in the food stamp program that is needed to insure our hungry, mostly single mothers and kids, are fed at the minimum healthy levels(enforcement of the proper enactment process would greatly eliminate much of the waste and abuse in all these areas), 5) supports legislation in every state that would restrict voting rights of blacks, Hispanics and whites that support Democratic candidates or beliefs, and 6) openly supports the Heritage Foundation, an extremely conservative organization that is at best un-American. These malcontents have their own agenda and are not willing to work with other in Congress or the grass roots people. The word compromise eludes their small minds. We must replace these radical members of the United States Congress and show them that, we, the people, still run this Country. Should the GOP candidate have no challenger write in the name of your local Police Chief or someone else you and trust?

  • Report this Comment On October 30, 2013, at 9:26 AM, NOTvuffett wrote:

    I am so glad that Sandra Fluke has her contraception subsidized now, and it only will cost me a few more thousand dollars a year to give it to her, lol. Anyway, we are screwed.

    Why couldn't we have done something sensible like mandating catastrophic care. You know, like if you are the unlucky bastard that gets cancer... and health savings accounts so that when you are young and healthy you save for the day when you will need the money?

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