It's been five days since the Affordable Care Act's online marketplaces began enrolling Americans for health insurance in 2015, and perhaps the most amazing aspect of the launch thus far is that it's been largely uneventful.
To some extent we have to realize that people are notorious procrastinators and are likely going to wait till the tail end of the open enrollment period, which ends on Feb. 15, 2015, to sign up. But simply avoiding a repeat of the broad IT-architecture issues that plagued Healthcare.gov last year (as well as a number of state exchanges) is a positive sign.
Enrollment estimates get slashed
Of course, we also need to realize that enrollment expectations for the ACA, which you probably know better by now as Obamacare, were reduced by more than a quarter at the midpoint by the Department of Health and Human Services just days before the Nov. 15 enrollment kickoff date. With the Congressional Budget Office previously forecasting 13 million enrollees by the end of 2015, the HHS offered up its own end-of-the-year projections of just 9 million-9.9 million. Assuming a retention rate for existing insured Americans of 83%, the expectation is that 3 million-4 million currently uninsured people will enroll this year.
Some might view this figure as a disappointment since the HHS admitted it wasn't exactly seeing a strong transition from employer-sponsored insurance and off-exchange coverage to the Obamacare exchanges yet. Here's another way to look at it: if people are getting insured through their employers or via a private exchange, such as that offered by eHealth, then the reduced estimates aren't necessarily bad news in and of themselves.
But here are the real concerns
Instead of worrying about the HHS's latest Obamacare estimates, I would suggest that Obamacare could be in for a world of hurt because of three completely different reasons, which were highlighted by a Kaiser Family Foundation study released in October.
In addition to releasing data that showed 43% of respondents view the ACA unfavorably, compared to just 36% that like it (a view that's been nearly steady since the law was passed in 2010), the Kaiser Family Foundation's Health Tracking Poll shed light on three data points that should have Obamacare proponents, and investors, seriously concerned.
No idea when open enrollment starts
To begin with, when polling uninsured Americans in mid-October, KFF discovered that a significant number of them had no clue when open enrollment began. Just 11% correctly answered that open enrollment began in November, with 3% suggesting another time in 2014, 10% choosing a date in 2015, and a whopping 76% not knowing or simply refusing to answer.
As I mentioned, Americans are notorious procrastinators when it comes to enrolling for health insurance. But this statistic is disturbing despite that fact, as it implies that the HHS and individual states have done a poor job of getting the message out to uninsured consumers prior to the open enrollment launch.
Little direction on how or where to enroll
The second point comes from two questions posed to uninsured adults aged 18-64: Do you plan to get health insurance in 2015? If "yes," how do you plan to obtain coverage?
A clean 38% of Americans questioned still have no intention of signing up for health insurance in 2015. This shows how difficult it will be for insurers to reach the remaining uninsured, since the easy enrollees signed up in 2014.
Furthermore, the second part of the question for the 59% of respondents that said they did plan to obtain health insurance this year showed that 21% of respondents (or 36% of the people who said "yes") had no clue how they were going to obtain coverage. Just 7% noted their intent to get coverage through the online marketplaces, 5% planned to purchase insurance on their own but were not sure if it would be through the online exchanges or a private exchange, and 3% planned to buy from a private insurer. Again, this leads back to the implication that the HHS and individual states have done a poor job of educating the public about the various ways they can get covered.
Cost is still a big worry
Finally, and returning back to the prior question asked to the uninsured on whether or not they plan to get insurance, a good portion of respondents who claimed that they wouldn't said so because they didn't believe they'd be able to afford health insurance through the online marketplaces. The data showed 18% of total respondents shared this concern -- but since 38% noted they planned to remain uninsured, it means that nearly half of all respondents intending to remain insured are worried about health insurance costs.
Additionally, 9% of total respondents, or about one-quarter of the "not intending to get insurance" crowd, said that they didn't want to be forced to purchase anything. Past studies have shown that some young adults consider themselves to be invincible or simply won't go to the doctor, making this a very difficult crowd to eventually reach.
Time to panic?
Though it's probably not time to panic just yet in spite of these worrisome KFF study responses and the HHS's reduced estimates, it is worth keeping a close eye on insurers, which would feel a direct impact via lower enrollment, hospitals, which might see a smaller than expected reduction in doubtful revenue since they'd be potentially dealing with more uninsured individuals than expected, and medical equipment makers, which have been counting on more people getting insured to drive sales higher.
Taking this in reverse, I especially worry about specialized equipment makers that sell high-priced equipment, like Accuray (NASDAQ:ARAY). Accuray's guided radiation device, known as TomoTherapy, costs in the neighborhood of $3 million, and if enrollment runs weaker than expected, hospitals may opt to go back into cost conservation mode until they have better Obamacare visibility and hold off on large purchases.
Hospitals, such as the nation's largest provider HCA Holdings (NYSE:HCA), have similarly been counting on strong enrollment to help drive down their doubtful accounts (doubtful accounts are money that goes uncollected due to nonpayment following services rendered). If enrollment proves not to be as strong as expected HCA's doubtful provisions may not fall much, and its profitability expectations could drop.
Lastly, weaker enrollment is a big problem for most insurers. WellPoint (NYSE:ANTM) may not see significant downside since it's already seeing profits from its Obamacare enrollments, but nationwide insurers CIGNA (NYSE:CI) and Aetna (NYSE:AET) are counting on stronger 2015 enrollment to help push their marketplace enrollments into the green. If these insurers are unsuccessful in their efforts investors may prove less than forgiving.
Clearly there's a lot to take in during this second year of enrollment, but it remains in your best interests as consumers and investors to stay abreast on the latest news as it develops over the next three months.