Does This New Data Mean That Obamacare Will Fail?

The past three-and-a-half months have been nothing short of a roller-coaster ride for Obamacare and its state and federally run health exchanges.

Opinions regarding the Patient Protection and Affordable Care Act have been bifurcated for years -- and enrollment results in October, November, and December have delivered in an equal, if not greater, bifurcation in their results.

October and November were absolutely marred by IT-source code glitches and overloaded servers, which caused the federally run website, Healthcare.gov, to be unusable for a majority of the citizens it services across 36 states. Through the first two months, federal sign-ups stood at just 137,204, placing them well short of initial sign-up estimates by the Department of Health and Human Services, which has been targeted 7 million paying enrollees by the March 31 coverage cutoff date for 2014.

In December, the tech surge, headed by the trio of Oracle, Red Hat, and Google, and overseen by UnitedHealth Group subsidiary, Quality Software Services, coupled with the Dec. 24 coverage cutoff deadline for Jan. 1, led to a surge in cumulative state and federal enrollments, from 364,682 through November to 2,153,421 people through Dec. 28. Other pertinent information from inception through Dec. 28 includes 53.2 million state and federal website visits and 11.3 million calls to state and federal call centers.

Source: White House on Flickr.

One pressing question finally answered
A little more than a month ago, I listed three pressing Obamacare questions that had yet to be answered. One one was the creme de la creme of questions: What percentage of paying enrollees are healthy young adults? On Monday, the HHS released this first bit of this "Holy Grail of data," and the initial results (links opens PDF) weren't too encouraging on the surface.

Despite enrollment surging to 2.15 million, just 24% of all enrollees (489,460) are in the 18 to 34 year age range, while a whopping 79% of enrollees received some form of financial assistance.

In addition, we discovered that 80% of enrollees selected one of the two lower-tiered plans, bronze (20%) or silver (60%), with few people opting for more expensive but lower deductible gold (13%) or platinum (7%) plans. Furthermore, the 20,224 catastrophic plan enrollments means very few people took advantage of the ability to extend catastrophic plan coverage in 2014 that would have otherwise been cancelled under the expanded benefits deemed necessary for insurers by the PPACA. If you recall, there were nearly 6 million people poised to lose their health insurance on Jan. 1 according to Forbes, so it appears that few people took advantage of the Obama Administration's attempt to extend coverage without these citizens having to face a significant increase in premium prices. 

Does this mean Obamacare is destined to fail?
These results demonstrate a significant shortfall in the number of young adult signups, which the HHS had pegged at 38% of the 7 million enrollees before the health exchanges opened for business. This is a problem because healthier young adults are needed by insurers to help offset the costs of treating elderly and terminally ill patients, especially because a major new component of the PPACA is that insurers can't turn down people with preexisting conditions. As I've noted before, half of all health expenditures in this country are spent on just 5% of the population annually, so healthier adults are needed to help allay these disproportionate costs.

Source: White House on Flickr.

Monday's initial data would imply that this ongoing young adult enrollment shortfall will necessitate significant premium price hikes by insurers for 2015 to help offset the costs of treating sick patients, calling into question the whole premise that a more universal health reform, which brought more paying Americans into the fold, would help reduce long-term costs.

The addition of roughly 4 million Medicaid-approved members further complicates the burden of expanding health insurance under Obamacare relative to just 2.15 million paying sign-ups.

Not so fast...
While the data thus far would indeed portend bad news for future premium pricing, there isn't enough reason for consumers or investors to start running for the hills... yet!

The first factor to consider is that we still have two-and-a-half months of eligible enrollment left before Obamacare's 2014 coverage cutoff period ends. Americans are notorious procrastinators when it comes to paying their bills, so it would come as no surprise if we saw the bulk of enrollments on the back end of the coverage cutoff date.

With that being said, perhaps no age group procrastinates more than young adults. I should know – I am one, and I can tell you firsthand that quite a few of my friends in that age range are still pondering what they're going to do with regard to purchasing health insurance for themselves.

In addition, I wouldn't be too alarmed for insurers that a majority of Americans are choosing the cheaper path by purchasing bronze and silver plans relative to gold and platinum plans. In fact, insurers and the HHS were dead on in their estimation that silver plans would be the most popular choice among potential customers. Similar to a retail environment, lower priced products can often have the beefiest margin potential, especially for insurers, which will rely on consumers to kick in 30% to 40% of the medical costs as well as co-pays.

Specifically, I would say this benefits a company like WellPoint (NYSE: WLP  ) , which purchased Amerigroup for $4.5 billion to focus on government-sponsored individuals. WellPoint, which has a strong presence in California and New York, should see benefits from Medicaid enrollments, as well as some of the 2.15 million paying enrollees.

Worry about this instead
Instead of worrying about the shortfall in young adult signups that could very well be rectified by late March, I would instead be concerned for hospital providers and pricier medical device makers, which may have something to worry about with the number of bronze and silver plans coming in at 80% combined.

Whereas this figure works in the favor of insurers, hospitals run the risk of patients simply being unable to pay for services rendered. Although out-of-pocket costs are about the same for all insurance tiers, the percentage of payment due for services rendered is considerably higher for bronze and silver plans. Let's face it -- the reason consumers selected these plans likely had a lot to do with costs, so when they do eventually require medical care, it could be an adventure to see if these hospital providers can collect. An operator I worry about is Tenet Healthcare (NYSE: THC  ) given that a number of its hospitals are in regions of the country where Medicaid isn't expanding, leaving an already disproportionate number of uninsured people still uninsured.

This is also a concern for medical device makers like Intuitive Surgical (NASDAQ: ISRG  ) . In spite of Intuitive's solid preliminary revenue guidance for the fourth quarter, the uncertainties surrounding Obamacare's implementation have caused many health-sector companies to hold back on their spending. With Intuitive's soft tissue surgical system known as da Vinci costing roughly $1.5 million, it may find the sales environment difficult for the time being. Yesterday's preliminary report, though better than Wall Street expected, did show a marked 23% decline in surgical system sales, which I believe could be a direct result of Obamacare and hospital's cautionary spending habits.

We're almost there
With three-and-a-half months of enrollment in the books, we're more than halfway to the March 31 coverage cutoff date. While the initial data looks disappointing in terms of young adult sign-ups, I'd feign to call Obamacare a failure as of yet – though it will need to work hard to lure in young adults from this point forward. As we approach and pass March 31, we'll have a considerably better idea of how successful Obamacare was in luring young adults to purchase health insurance, and what the future might hold for insurance premiums in 2015.

Curious how Obamacare will you and your portfolio? We can help answers these questions!
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Read/Post Comments (44) | Recommend This Article (11)

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  • Report this Comment On January 15, 2014, at 3:49 PM, TimTowner wrote:

    It's amazing to me how the article completely ignores the fact that the young and healthy have to CONTINUE to pay their monthly premiums. Just because they signed up and paid their first month, doesn't mean they will continue to pay. Rent, car payment, cable/internet and cell phone bills will always precede a health care payment. Once they get behind on payments, good luck trying to collect.

    If Obamacare's success rides on this high unemployed group (the under 35 crowd), this thing is doomed.

  • Report this Comment On January 15, 2014, at 3:52 PM, woodrow68 wrote:

    The catastrophic plan extension to those who had their policy cancelled is a joke. I qualified for this plan, but the catastrophic plan was more expensive than the bronze plan for less coverage. Just more smoke and mirrors...

  • Report this Comment On January 15, 2014, at 4:06 PM, gjsuhr wrote:

    So....76% of the sign-ups are old (35 or older) and 79% are subsidized.

    I'm no actuary, but I'd hazard a guess that those numbers will not cover plan costs.

  • Report this Comment On January 15, 2014, at 4:06 PM, ooknightx wrote:

    I think the most important stat. is the fact that 79 percent of the enrollies (including the young adults) are recieving some sort of government assistance. That means it leaves only 21 percent to cover the rest.Get ready middle class America,we are about to get stomped

  • Report this Comment On January 15, 2014, at 4:08 PM, jethrohooper wrote:

    Come on, all you young adults who voted for Obama, and have been champions of his plans for income redistribution. This is YOUR opportunity to pay MORE than your fair share, to help all the sick old people. Put your money where your collective mouths have been. Sign up, pay up, and shut up. After all, who did you think was going to pay for all of this benevolence?

  • Report this Comment On January 15, 2014, at 4:10 PM, mark636 wrote:

    No just means the middle class will get screwed with even higher premiums thanks to democrats.

    Only the sick and old are going to sign up for this high premium/ deductible rip off

  • Report this Comment On January 15, 2014, at 4:12 PM, getstarted wrote:

    Was there ever really a question as to whether this absurd law would fail? Having to ram it down the American throat under cover of the holidays should've been at least the 10 indicator.

  • Report this Comment On January 15, 2014, at 4:13 PM, kca124cain wrote:

    We need to also look at what is going on with company plans. Many companies are reducing their plans so they are not in the "Cadillac plans" which Obama is attacking.

    Of course, if Obama gets his way, union Caddy plans will be exempt.

    Is this a ploy to encourage everyone to support unionization?

    Socialism at its best?

  • Report this Comment On January 15, 2014, at 4:31 PM, impeachobammie wrote:

    will fail??? it has already failed

  • Report this Comment On January 15, 2014, at 4:33 PM, stevesr54 wrote:

    This obamacare plan should fail because it's government forced insurance plans that the government has no business making us or anyone buy! If for no other reason, that alone should be plenty enough reason because if they get away with this whats next?

  • Report this Comment On January 15, 2014, at 4:42 PM, vmfool wrote:

    Who get's paid to write these transparent, pandering, formulaic comments? People 18-34 arent signing up in droves because parents can keep their kids on their plan until they're 26. So half of the age range being measured has no reason to sign up. And no, this will not destroy the program since anyone who has the ability to buy insurance but doesn't will have a tax penalty, which helps pay the subsidies.

    Time to point out the truth; ObamaCare was not created by Obama. It was created by the Heritage foundation before they went over the edge of sanity and still real Republicans. It's a free market system, a huge givaway to the the insurance companies (I wish the goverment would put a hugh national web site to sell my products, and fund and staff it), and will be around for a long time, like Social Security and Medicare.

    Stop whining about how all your problems are caused by liberals. Take ownership of the debt you ran up. Or give back all your Social Security checks.

  • Report this Comment On January 15, 2014, at 4:43 PM, dannystrong wrote:

    Social democrats (you call 'em "liberals", incorrectly) believe they can force people to do things not in their interest "for the common good" (defined by social democrats, and usually rich ones at that).

    If the law (as it does), provide for a $285 (maximum) penalty for not buying insurance, a $4,000 (or so) minimum cost of that insurance, and disallowing no-pre-existing condition rejections, why in the name of all that is great, good, and non-fattening would any young, single we-need-their-money-or-we're-dead buy insurance? I'll just wait until I get sick…

    … and yet Obamacare is predicated on people seeing this calculation and still being such good citizens that they will do exactly this, by the millions.

  • Report this Comment On January 15, 2014, at 4:54 PM, Paulson545 wrote:

    If it's mandatory for young people to sign up to make it work than force them to pay a hefty penalty. If they refuse than have the IRS go after them.

  • Report this Comment On January 15, 2014, at 5:51 PM, huntergnr wrote:

    So what's the next move? Raise rates on everyone else to cover the gap of course.

  • Report this Comment On January 15, 2014, at 6:00 PM, OScammieeyou wrote:

    Obama healthcaregov was never intended to function as it was sold

    to American public-it is rigged as a spoof phishing scam to gather

    data otherwise unattainable under Federal H.I.P.A. now snookering

    the unsuspecting public the weakest and vunerable into opening up

    once sealed medical files diverted in the process to Obama's own

    personal use that of which allowed him to issue directives to FDA

    to fast track approvals for any bio tech companies working on

    drugs targeting these illnesses in which teh President's blind

    investment trust takes insider position the efficacy of drugs

    being tested never at issue as FDA is not a scientific research

    org. but an political device as past FDA insiders along with bio

    tech doctors and scientists have been charge with insider trading

    over the years only that semblance of a cure be made for a quick

    buck.

    Obama will leave office the wealthiest man on Earth while

    taxpayers who cant afford insurance fund his exploits.

  • Report this Comment On January 15, 2014, at 6:43 PM, greeddestroysUS wrote:

    Whatever you call this mess, ACA, abominablecare, redistribution of wealth, socialism...and whoever you blame it on, the left, the right the dems the repubs, the liberals, China, and on and on, it is just one thing to me; it's an INDUSTRY-WIDE MONOPOLY!

    It isn't capitalism, freedom, liberty, democracy, free market competition or constitutional. A law that tells you you have to buy something? (And it isn't comparable to auto insurance, a forced purchase in many states for the right to drive and to protect drivers from careless, reckless, drunken people destroying other's lives and property.)

    If healthcare costs rise any further - rather if they don't drop and become truly affordable, watch the effect it will have on other sectors of the economy. Watch how people slowly but surely stop spending on consumer goods, cars, homes, etc., as they finally realize the healthcare/pharmaceutical/ insurance goliath is going to suck us dry of any 'discretionary' income. Watch how medical innovation and discoveries dwindle as the cost of these cutting edge (no pun) procedures and treatments are in reach of only the very, very rich.

    A bumper sticker said it best. "If you not appalled, you aren't paying attention."

  • Report this Comment On January 15, 2014, at 7:27 PM, fhfhfh5656 wrote:

    Here are 204 reasons why hypocrite politicians and unions that support Obamacare want exemptions for themselves http://danfromsquirrelhill.wordpress.com/2013/09/24/obamacar...

  • Report this Comment On January 15, 2014, at 7:27 PM, killcommoncore wrote:

    Obamacare is DESIGNED to FAIL.

    After it's intended failure, and all Americans are clamoring for a 'solution', then Single Payer will be forced on us, and good-bye Freedom, hello Socialism.

  • Report this Comment On January 15, 2014, at 7:35 PM, TheCodeWrangler wrote:

    The simple reason that enrollees are staying away from "gold" and "platinum" plans is that they tend to not be worth the premium increase.

    Gold, silver and bronze have the same maximum out-of-pocket limit, regardless of premium paid. Anyone who has serious health issues knows they will hit it sooner or later so they just get the cheapest plan available for them.

    For most moderate users staying below deductible, it may make sense to buy up to a silver plan. however, the premium increase for choosing between silver and gold takes a bit more guesswork.

    The premium increase to buy up to a platinum plan is not at all worthwhile, IMO. The premium increase roughly equals the decrease in maximum out-of-pocket for a relatively small decrease in deductible and copayments. There may be some narrow case where it would be worthwhile but I can't see where that is.

  • Report this Comment On January 15, 2014, at 7:52 PM, MrMoses wrote:

    I hope it fails so I can get my hours back at my Job they cut my hours in half so they wouldn't have to offer health insurance Thank you Obama

  • Report this Comment On January 15, 2014, at 9:05 PM, thegodfather4u wrote:

    The RAPE of America continues with the Democrats at the helm and has been evident for OVER last 6 + years.... impossible unemployment, history making deficits, never mentioned millions of homeless, spying on american's phones, computers, email, financial information, stolen billions from our medicare and social security, increased false data fed to us by government owned media (communist brainwashing) to try and put american's into a false sense of security, allowing over 38 million illegals pushed on our floundering economy, increased racial tensions, have more and more CFR/Trilateral nominee's appointed and a Supreme Court making laws against Americans, allowing insider trading with the senate, congress, and every "in the know" employee in the fed, propaganda through the AP/Bloomberg/CNN/CNBC/Yahoo/ etc creating more in-fighting , and the violation of our constitution over and over by the individuals we elected and the farce of the Unconstitutional OBAMACARE ...As all the VIOLATIONS committed against our Constitution, the only reason he is still in office is simple....anyone with half a brain knows why!!!

    To tell "We the People" that we MUST take all of this and say nothing is DISGUSTING & UNACCEPTABLE............OUR CHANGE WAS NEVER MEANT TO BE NICKELS AND DIMES..........

  • Report this Comment On January 15, 2014, at 9:12 PM, MSF7 wrote:

    So what genius thought this up? From day one, this premise of the young, healthy will support the old and expensive has a fatal flaw.

    Who are the customers obammacare wants ? The 21 to 35 ish year olds, correct ? Wouldn't you say this is basically the backbone of the American workforce? Am I missing something but wouldn't most of this age group get their medical insurance from their employers ?????? It appears his target group is mostly already covered !!!!!!

    Am I missing something here ?????

  • Report this Comment On January 15, 2014, at 11:20 PM, WeWa wrote:

    Aside from the disaster that Obamacare is, must we have journalists that don't know the language? What's this? "I'd feign to call Obamacare a failure as of yet"? Feign means "pretend." What word were you looking for when you landed on that one?

  • Report this Comment On January 16, 2014, at 12:32 AM, NoMoeMoney wrote:

    Its only gonna get uglier folks and when people start to see gramma and grampa die because they couldn't get access to quality care?The storm will rise.

  • Report this Comment On January 16, 2014, at 6:19 AM, Dadw5boys wrote:

    I know people who need it desperately a couple even need operations but they can't afford the insurance. They need to file bankruptcy because of past medical bills. A couple just can't make enough money with kids and bills to buy it .

  • Report this Comment On January 16, 2014, at 8:12 AM, angelsgiggle wrote:

    The same thing happened with Romneycare. It took a while for the young to come on board but they did.

    Today these people would not trade their state's healthcare for anything!

    It's way too early to bury Obamacare just yet. I have heard good things and my experience has been good.

  • Report this Comment On January 16, 2014, at 8:14 AM, JayTor2112 wrote:

    I don't need any "new data" to know it will fail. It was designed to fail, becasue it was never about health care, as is all of the leftists' agenda, it's all about power and control. It's designed to destroy the private healthcare industr, put it all in the government's hands, and give them the ultimate control over us, through our helthcare, how we live (bcausue it has an effect on the system), and our very lives.

  • Report this Comment On January 16, 2014, at 8:54 AM, WDO wrote:

    The question I would like to have answered is this: If 24% of the enrollment thus far are "young invincibles", what percentage of those 500,000 are NOT healthy but rather chronically or terminally ill and what negative impact will those that are actually "young vincibles" have on the overall cost of this monster?

  • Report this Comment On January 16, 2014, at 9:00 AM, GovInsider wrote:

    President Obama, get a clue! Young people won't sign up for Obamacare because your administration refuses to provide them with quality health care. That's not just my opinion, here's evidence: http://www.mothering.com/community/t/1387804/breastfeeding-a...

  • Report this Comment On January 16, 2014, at 9:00 AM, randywa wrote:

    This has been a FAIL from the word go.

  • Report this Comment On January 16, 2014, at 9:17 AM, nunyabiz wrote:

    Does This New Data Mean That Obamacare Will Fail?

    we can only HOPE. then people can go back to tailoring a plan for the INDIVIDUAL needs and budget.

  • Report this Comment On January 16, 2014, at 9:59 AM, govlies2 wrote:

    obamacare should fail just like obama ! they are a joke and the biggest GOV. SCAM this country has ever pulled on its own people. we have went to war for yrs to be a free country & to let our gov take that away ! No Way Obama and everyone involved in this scam of his two terms should be put in Prison and made to pay/give back every penny they have made off of this B.S. GOV TAKE OVER SCAM with Obamacare. It was a lie from the start.

  • Report this Comment On January 16, 2014, at 10:10 AM, RoccoTool wrote:

    Why, the Low Infos have nothing to fear! The Messiah President SAID the economy is roaring back, jobs will be EVERYWHERE, and those free phones will have every young student enjoying FREE healthcare! Right?

  • Report this Comment On January 16, 2014, at 10:11 AM, RoccoTool wrote:

    Why, the Low Infos have nothing to fear! The Messiah President SAID the economy is roaring back, jobs will be EVERYWHERE, and those free phones will have every young student enjoying FREE healthcare! Right?

  • Report this Comment On January 16, 2014, at 10:29 AM, moiraacleary wrote:

    the idea that the Hertiage Foundation created Obama care is just wrong. They had spoken and written about lowering health costs but none of their ideas were in this law. The creation of this mess is with a small group of liberal democrats that really wanted control which is why they want your account numbers.

  • Report this Comment On January 16, 2014, at 10:30 AM, moiraacleary wrote:

    this is working exactly the way they want it to..when it fails they will implement single payer, national health care.. the end

  • Report this Comment On January 16, 2014, at 10:35 AM, sogole wrote:

    People simply cannot afford to pay for this law.

  • Report this Comment On January 16, 2014, at 10:50 AM, sabebrush6 wrote:

    Hey - all you Democrats that voted for Obama, it's your chance to show the Republicans how to stand up and buy into your revered leaders plan for you and purchase Obamacare. Afer all, you voted for him.. Don't you think it's your duty to back his plans for you. He does care for your health & safety, right ?

  • Report this Comment On January 16, 2014, at 12:06 PM, Cody700 wrote:

    Will Fail?????? I believe that it has already failed if you take into account what was promised, as compared to what is being delivered.

  • Report this Comment On January 16, 2014, at 12:09 PM, partsman35 wrote:

    You Republicans want Obamacare to fail so bad you can taste it, It's funny you people felt the same way about Social Security and still do. Is the reason because he is a Black man and you Republicans didn't think about it first. I'm sick of hearing you people talk. If you don't like it then you come up with something better.

  • Report this Comment On January 16, 2014, at 3:47 PM, Cathlaber wrote:

    This should really help the ROBUST economy.......the deductibles alone will keep people from spending on that new TV! Gotta save for that future operation!

  • Report this Comment On January 17, 2014, at 5:38 AM, Pendragon0210 wrote:

    I live in the West Coast of Florida they are closing 3 trama Hospitals Including This week, several of the state's longest-operating trauma centers — including St. Joseph's Hospital and Tampa General Hospital — asked state courts to order that the new trauma centers in Pasco and Manatee counties be closed.Due to The new HealthCare Law as well as doctors going to Pay when service is provided and not taking Medicare or Medicaid with Big Signs out front

    Add in CSPAN, CNN and Fox News Saying the Personal Security and Hackers are an Issue never addressed and the Head of Security for the WebSite David Kennedy said He would never Sign up on it the way it is now and it is worse now then when it rolled out in October This all to the Congress instructing people not to sign up...Who Do we Listen to? Should we be Like Sheep at Target and Niemen Marcus and Starbucks Or play it smart and just not sign up like everyone else who is not and let it collapse on itself

  • Report this Comment On January 17, 2014, at 4:54 PM, foolishfollies wrote:

    The basic tone of MF articles I have read over the last few years seems to indicate they actually trust the government. Thankfully they are a financial source and not a political source. otherwise they would have to take a number 2 spot behind MSNBC.

  • Report this Comment On January 17, 2014, at 4:55 PM, foolishfollies wrote:

    Very encouraging to see only 2 clueless liberals exulting the virtues of Obozocare out of all these posts.

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