3 Pictures of Obamacare: The Good, the Bad, and the Ugly

Passions run deep when it comes to the Affordable Care Act, commonly known as Obamacare.

Supporters look for every positive sign that the health reform legislation is achieving its goals. Opponents point out every way that the implementation of the law isn't going well. Last week's enrollment numbers gave at least a little bit of ammunition to both camps. Here are three pictures of Obamacare from that data -- the good, the bad, and the ugly.

The good
It isn't too difficult to find the best trend from the Obamacare enrollment figures. Many more Americans have signed up for health insurance in the last few weeks than did in the first couple of months after the launch of the online marketplaces.

Source: U.S. Department of Health and Human Services. 

The changes made by the White House, including giving the reins to one lead contractor, UnitedHealth Group's (NYSE: UNH  ) Quality Software Services, seem to have paid off. While some problems remained, the federally operated HealthCare.gov website performed much better than it did during the first two months of operation. UnitedHealth's unit picked up another $50 million for its part in the remedial work -- not bad money, but only a drop in the bucket compared to the $122.5 billion it made over the last 12 months.

However, this picture isn't quite good enough at this point. Back in September, Health and Human Services Secretary Kathleen Sebelius stated that "success looks like at least 7 million people having signed up by the end of March 2014." Even adding the nearly 957,000 individuals selecting a plan through state-operated exchanges to the 1.2 million total from HealthCare.gov, there's a long way to go to meet that goal.

The bad
One Obamacare enrollment statistic that hasn't received as much publicity relates to the gender gap. Many more females are signing up for insurance than are males.

Source: U.S. Department of Health and Human Services. 

The population split of the total population of the U.S. younger than age 65 is roughly 50% male and 50% female. That's not what we're seeing so far with Obamacare enrollment. Nearly 10% more women are signing up.

What's bad about this picture? Not much, necessarily -- unless you're an insurance company. Females tend to incur higher medical costs than males. Prior to Obamacare, insurers accounted for this by charging higher premiums to women than they did to men. With the health reform legislation, though, insurers must charge the same premiums regardless of gender.

We could be simply watching the law of demand covered in freshman economics courses work its magic. Insurers, forced to charge the same amount for men and women, increased the prices for men to subsidize the higher costs for women. As the price for men went up, demand likely went down. 

The problem for insurers is that they need those men to buy insurance. Instead, they're covering more women with the corresponding likelihood for higher medical costs. And higher medical costs mean bad news for health insurance companies.

The ugly
While higher medical costs from more female members might be bad news for insurers, the truly ugly news stems from another demographic difficulty. Fewer younger Americans are signing up for plans on the Obamacare websites than anticipated.

Source: U.S. Department of Health and Human Services. 

Insurers hoped that around 40% of enrollees would be between the ages of 18 and 34. Instead, only 24% of total Obamacare sign-ups comes from that target age range. The heaviest turnout for enrollment is coming from the demographic that insurers really covet the least -- Americans age 55 and over.

In this case, age is really just a proxy for health status. Younger individuals are presumed to be healthier (and less costly for the insurer) than older individuals. Granted, that's not always true, but with large enough population groups it's a reasonable premise.

The bottom line is that without enough younger Americans signing up, insurers will lose money on Obamacare. Humana (NYSE: HUM  ) has already issued a warning that its enrollment mix will be "more adverse than previously expected." The large insurer stuck with its earnings outlook for 2014, though, counting on stronger Medicare enrollment to offset the potential losses from Obamacare.

Selfie
Considering that the Oxford Dictionary named "selfie" as the word of the year in 2013, it's probably safe to say that the picture Americans care most about includes themselves in it. How do you fit into these three pictures of Obamacare?

You could be among those gaining insurance through HealthCare.gov as shown in our "good" picture. If so, depending on your age and where you live, you could be paying less than you did before. Unfortunately, you could also be paying a lot more than you did in the past. For 79% of you in this picture, the federal government is providing some financial assistance.

If you're in the smaller slice from the "bad" picture (males selecting a health plan), odds are you're paying more for health insurance than you used to. You might be doing so even if you're in the female part of the picture. Either way, it's likely that you did actually have insurance in the past. According to The Wall Street Journal, as little as 11% of individuals signing up on the Obamacare exchanges were previously uninsured.

Where are you in the "ugly" picture? Assuming you're a taxpayer, you could be on the bottom line. That's because the bottom line is that your taxes help foot the bill for insurers that lose money if too few younger, healthier individuals sign up. Obamacare's "risk corridor" program subsidizes insurance companies' losses with federal subsidies. Whether you love Obamacare or hate it, remember to smile -- you're in the picture.

Click and snap 
Obamacare seems complex, but all it takes is one click and you'll be up to speed on how health reform impacts you in a snap. 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." This FREE guide contains the key information and money-making advice that every American must know. Please click here to access your free copy.


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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 January 22, 2014, at 2:11 PM, TXObjectivist75 wrote:

    Is the enrollee number just actual, paid-up with a policy in force? Or does it include Medicaid signups and "policy selections" with no actual policy in force?

  • Report this Comment On January 22, 2014, at 9:18 PM, TMFFishBiz wrote:

    TXObjectivist75,

    The numbers released so far are just policy selections. There is some anecdotal information from insurers that actual paid-up policies are around 50-70% of the figures reported by the government. However, there are no firm numbers of actual enrollment yet.

    Thanks for reading.

    Keith

    (TMFFishbiz)

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