To work successfully, Obamacare needs people like the guy that signed up last week. He selected a bronze plan through the District of Columbia's exchange. And he's highly unlikely to make a single claim in 2014.
The guy? None other than Barack Obama. While the president will pay the plan's premiums himself, he's unlikely to make any claims, since his health care is provided through military doctors. Talk about taking your medicine with a spoonful of sugar.
To work successfully, the Patient Protection and Affordable Care Act, better known as Obamacare, needs more enrollees like Obama that are unlikely to make a claim. Healthy enrollees are key to balancing out the big spenders with chronic diseases.
Insurers don't need symbolic purchasers like Obama that get their health care provided outside the system. The normal amount of claims will be just fine; aggregate premium payments, co-pays, and deductibles for healthy patients far surpass their aggregate medical costs.
On Sunday, the Obama administration said 1.1 million Americans had selected a health plan through the federally run exchange but didn't give any breakdown on how healthy the average enrollee was. Of course, all pre-existing conditions are covered by Obamacare, so insurers no longer have to ask how sick you are.
But a breakdown of age would be a good proxy. Younger people are more likely to be healthy, and their enrollment is ultimately the key to Obamacare's success.
With coverage set to start on Wednesday but the deadline for enrollment not until the end of March, it seems likely that uninsured sick people would sign up early to get coverage while many healthy individuals who had forgone insurance would continue to push off the payment until the last minute.
Insurers, such as UnitedHealth Group (NYSE: UNH ) and WellPoint (NYSE: ANTM ) , that are offering plans on the exchanges presumably factored the enrlolment timing into their premiums, figuring they might lose money on the early adopters and make up for it during the last nine months of the year.
Of course, the website issues that slowed early enrollment could further skew the percentage of healthy enrollees. People desperate for health insurance are more likely to have the tenacity to enroll in Obamacare despite website crashes. Last month, Humana (NYSE: HUM ) cut its enrollment projections by 50% after early enrollment stagnated. If those are mostly healthy individuals, it could be costly for the industry, especially for a company like WellPoint that has a large percentage of its profits coming from individual plans.
If the government doesn't release the numbers first, we should get an idea of the breakdown of healthy versus unhealthy enrollees when UnitedHealth, Humana, WellPoint, and the rest of the insurers release first-quarter financial results in April.
Obama might be paying more in 2015
Fortunately for insurers -- and unfortunately for consumers without subsidies -- the prices are guaranteed for only a year; insurers get to submit new pricing for 2015. If they've guessed horribly wrong about the risk pool, they'll adjust prices higher to compensate for the lack of Obama-like enrollees.
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