The Most Important Week for Obamacare

Americans have seven days left to sign up for Obamacare. Open enrollment ends on March 31 and won't reopen until Nov. 15. Excluding special circumstances, such as losing coverage at work, Americans won't be able to sign up for insurance on the exchanges until then.

The open enrollment period is there to protect insurers, such as UnitedHealth Group (NYSE: UNH  ) , Humana (NYSE: HUM  ) , and WellPoint (NYSE: WLP  ) , which would be adversely affected if people could enroll anytime. The insurers can't deny coverage for pre-existing conditions, so Americans could just wait until they had a medical issue and then sign up. That's not the way insurance is supposed to work.

The limited enrollment also protects hospitals that -- with the government's help -- would still have to cover unpaid bills for uninsured emergencies by people scheming the system, something Obamacare was designed to alleviate.

The end of the first open enrollment period also marks the deadline to get signed up or face a penalty on your 2014 taxes of 1% of your yearly income or $95 per person, whichever is higher.

Capturing the procrastinators
This week is critical to the success of Obamacare, since late signups are likely to be the kind of people who don't think they need health insurance; otherwise they would have signed up before Jan. 1, when insurance could have kicked in. They've waited this long to save a few months' worth of premiums.

People who don't think they need insurance, presumably because they don't have any pre-existing conditions will, on average, pay more in premiums than they will cost the insurance companies in medical expenses. Without getting those people to sign up, the system doesn't work, and insurers have to raise premium prices to reflect the increased average medical expense per member.

Enrollment slowed in February, with 942,000 enrolling in plans, down from more than 1.1 million in January. Even factoring in the short month, February still had fewer enrollees per day than January. The hope and expectation is that March should pick up pace, with the deadline looming.

The key demographic to look at is 18- to 34-year-olds, who should be healthier on average. In February, the group made up 27% of enrollees, up from 24% during the first three months the exchanges were open.

Not a make-or-break week
This week is clearly the most important week of open enrollment as the government makes a final push to persuade people to sign up for something that won't benefit them financially. (Many healthy people would be better off financially if they pay the penalty rather than pay for insurance.)

Source: Whitehouse.gov

But this week is far from a make-or-break week for Obamacare. Earlier this month, President Obama said the program was on track to be viable even though enrollment will fall well short of initial expectations. Any extra enrollees will help lower costs, but they're not needed to keep the system alive.

There have been reports that premiums might jump next year, but those are likely to be regional issues. Insurance is priced on a regional level based on regional enrollees. Insurers determined 2014 pricing based on assumptions without any experience on who might actually enroll. It's not surprising that they might have guessed wrong in some of the markets.

WellPoint, at least, doesn't seem to be having issues with making money in the new environment. Last week the insurer raised its forecast for 2014 from greater than $8.00 per share to greater than $8.20 per share. WellPoint cited the addition of 1 million to 1.3 million new members, which will drive increases in operating revenue and profits.

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