It's been an unbelievably ugly start for Obamacare, which, according to the Department of Health and Human Services Secretary Kathleen Sebelius, is setting a signup target of 7 million individuals by the mid-March coverage cutoff date. Between the countless technical glitches associated with the federally run Healthcare.gov, and a number of ongoing state-run health exchange issues, less than 365,000 people had fully enrolled for health insurance through the first two months of the health marketplaces being open.
But are expectations now so low that they're primed to be toppled? That very well could be the case!
Obamacare enrollments surge
According to statistics from The Washington Post, last-minute sign-ups for Obamacare's twice-delayed Dec. 24 coverage cutoff date surged in three reporting states. California estimated that 27,000 people fully enrolled for insurance on Monday, which follows 29,000 sign-ups the prior Friday. The Washington Post notes that California had averaged 15,000 signups per day over the previous week. Washington state also estimates that between Friday and Monday roughly 20,000 people fully enrolled for health insurance. Finally, New York estimated that it had roughly 20,000 people sign up on Monday.
Although these three states (which are all state-run exchanges) are just a limited subset of data leading into the coverage cutoff date for Jan. 1 coverage, which has now come and gone, it could portend that enrollments handily outpaced significantly lowered expectations.
Take California, for instance, which had fully enrolled 107,087 people by the end of November. Based on the above estimates, which include Friday, Monday, and a previous week of 15,000 signups per day, it would be conservative to estimate that California signed up 130,000 people in just the past week alone!
Similarly, New York enrolled just 45,513 people within the first two months and added roughly 20,000 on Monday alone! In other words, enrollment figures for each individual state may have more than tripled over just the past month, though it's still admittedly difficult to ascertain without data from more states.
Ultimately, though, we're at the mercy of limited reporting data from each state and the fact that the HHS only tends to update its enrollment figures once every month (the next update should be expected around Friday, Jan. 10). Until we get that data we have no way of confirming if Obamacare enrollments really surged past lowered expectations.
Here's two things we should be focusing on
In spite of the numerous unknown variables at work here, there are two factors of utmost importance that we do need to focus on.
First, despite this supposed surge in enrollments, the Dec. 24 coverage cutoff is more frill than substance. Although it does put a definitive line in the sand on when consumers can gain coverage, it's a date that was moved twice from its original Dec. 15 cutoff, and it's not nearly the most definitive line in the sand when it comes to Obamacare.
The date consumers really need to focus on is March 31, 2014, which is the coverage cutoff date to receive health insurance in 2014 without facing the individual mandate penalty, which is the greater of $95 or 1% of your annual income. The reason I focus on this date as opposed to Dec. 24 is that consumers are legally allowed to go without health insurance for three months per calendar year without falling out of compliance. Therefore, quite a few laggards will push off paying for their health insurance as long as is legally possible.
The other important factor that we have absolutely no clue about but matters above all else is what the age demographic profile of enrollees is. Although hospitals and insurers are generally reluctant to describe their clients and will be glad to gain any enrollees at this point, Obamacare needs strong enrollment figures from young adults if it hopes to counteract the higher costs associated with treating elderly and terminally ill patients. About half of our annual health-care expenditures go toward treating just 5% of the population, so without healthier enrollees the average premium price offered by insurers is going to soar.
What this means for you
As a consumer who's either fully insured or looking to obtain health insurance sometime between now and March 31, this past week's strong enrollment figures and the fact that the Obama administration finally stuck to its coverage cutoff deadline signal that the individual mandate is fully primed to go into effect next week. Simply put, Obamacare is the law of the land and it's not going away, so individuals need to have a game plan to be covered by health insurance by the end of March or be prepared to pay the penalty for noncompliance on their 2014 taxes.
For those of you who own insurance stocks such as UnitedHealth Group (NYSE:UNH), WellPoint (NYSE:ANTM), and Molina Healthcare (NYSE:MOH), you should be breathing a sigh of relief that initial enrollment proved to be as strong as these three states' figures would suggest.
WellPoint, the company behind the Blue Cross/Blue Shield name, operates in 14 individual state markets, including California and New York. Based on the strong enrollment figures above, it clearly should benefit. Molina Healthcare should also benefit as a low-income insurer in California's market. Focused on luring in government-sponsored members (i.e., Medicaid-approved), Molina likely cleaned up over the past week as the Dec. 24 deadline neared. Even UnitedHealth Group, which pulled out of California's individual insurance market last year, should have seen a push higher in enrollments throughout the other states it operates in.
Hospital and rehabilitation operators like HCA Holdings (NYSE:HCA) are also likely breathing a sigh of relief after this week's enrollment data. Hospitals like HCA are counting on more people to be insured so that they don't have to write off nearly as much revenue this year as uncollected from uninsured and underinsured patients.
Finally, consider how beneficial this enrollment data could be to the intricate medical device industry. Although the medical device excise tax of 2.3% is a necessary burden which is helping to expand the Medicaid program, more revenue collected by hospitals could mean bigger investments in newer medical technology. A company like Intuitive Surgical (NASDAQ:ISRG), which manufactures its soft tissue surgical system known as da Vinci, could see sales increase. At more than $1.5 million each, Intuitive's surgical systems haven't sold very well as hospitals tighten their spending habits in light of Obamacare's uncertainties; but these enrollment figures may loosen hospitals' wallets a bit.