It's really amazing how much of a night-and-day difference a year has made for the Affordable Care Act, known better as Obamacare.
This time last year the health reform law had enrolled nearly 1.4 million people, but that was only after it had enrolled fewer than 400,000 in October and November combined. Glitches galore and overloaded servers made the federally run health exchange known as Healthcare.gov practically unusable during the first two months of the 2013-2014 enrollment period.
Obamacare enrollment soars
However, fast-forward a full year and things are markedly different. Based on data from the Department of Health and Human Services, or HHS, regarding just the federal enrollments (i.e., only 37 states), the fifth week of enrollments (Dec. 13, 2014, to Dec. 19, 2014) led to a more-than-doubling in plan selections to over 6.3 million, a near doubling in applications submitted to just shy of 8 million, and about a 40% increase in Healthcare.gov users to over 14 million. In total, 1.9 million of these plan selections were for new customers with the remainder simply re-enrolling in the same or a new plan.
"Why was enrollment so strong in week five?" you wonder? It has to do with a combination of setting the stage for urgency as well as automatic re-enrollments kicking in.
Last year, consumers had six months (Oct. 1, 2013, to Mar. 31, 2014) to enroll for health insurance, with many waiting until the last possible minute to pay their premium and enroll. In the 2014-2015 period there are only three months to enroll (Nov. 15, 2014, to Feb. 15, 2015), pressuring consumers to make their move sooner. Additionally, most consumers needed to sign up by Dec. 15, 2014 in order to be covered by Jan. 1, 2015, which is an added incentive to not procrastinate.
The other factor that weighed heavily were automatic renewals, which are new this year. If consumers simply chose not to do anything they were automatically enrolled in their existing plan from the prior year. Considering that 83% of the 4 million people that selected a plan in week five were simply renewing their coverage, I have to believe the automatic renewal process played a key role in boosting week five enrollment.
Inclusive of the more than 700,000 enrollees that state-run exchanges had added as of week four (ending Dec. 12), there have been more than 7 million plans selected. That's great news considering that the HHS was only estimating 9.1 million enrollees by the end of the enrollment period. At the moment, its estimate looks to be conservative.
Hold your horses
But, don't count your chickens just yet! There are no guarantees that Obamacare is poised to be a success in its second year. There are still two big hurdles that could wind up derailing the health care reform law in its second year.
For starters, let's not forget that even with the enrollment restatement that the HHS issued in November, the program lost approximately 1 million enrollees due to lack of payment between April 1, 2014 and Oct. 15, 2014. Who's to say that won't happen again in 2015?
While most consumers would prefer to have health insurance than not have health insurance, the monthly premium payment combined with copay and deductible costs may be too much for some individuals and families to bear. A recent Gallup survey showed that a third of respondents had put off a medical procedure due to cost, which demonstrates to me that health care costs still put medical care out of the reach of some consumers -- even those who are insured.
In other words, just because they're enrolled doesn't mean these individuals will remain enrolled throughout all of 2015.
Perhaps an even bigger challenge for the program looms in June with the Supreme Court deciding whether or not federal subsidies are legal. The case revolves around language in the ACA which essentially notes that states can hand out subsidies to eligible individuals, but since the federal government is involved in running the online exchanges for 37 states, those citizens may be ineligible for subsidies.
If the Supreme Court finds against the plaintiffs, a big cloud hanging over Obamacare will be lifted. But, if the Supreme Court finds in favor of the plaintiffs, Obamacare could be in big trouble. Last year 87% of enrollees via Healthcare.gov received a subsidy, meaning a proportionate amount of this year's enrollees would see their subsidies disappear. My suspicion is most of these enrollees would be unable to continue paying for their health insurance and could drop out. If this ruling were to be made, the solution would be for states to set up their own individual exchanges. However, states whose lawmakers hold opposing views of the law may be less inclined to make that move. Other states would likely take a year or longer to get their exchange up and running. Needless to say, it's a very tricky scenario that's just months from playing out.
Without question, better-than-expected early enrollment has to be exciting insurers, but we don't yet know how many of these re-enrolled members switched plans, whether or not they'll stay the full year, and how the Supreme Court will rule. In short, betting on the insurance sector here could be akin to spinning the roulette wheel and hoping your number hits.
One thing to keep in mind, though, is some insurers aren't wholly reliant on Obamacare for their success. National insurers like CIGNA and Aetna predominantly rely on commercial insurance policies to boost their bottom-line, so a decision in favor of the plaintiffs by the Supreme Court is unlikely to dramatically impact their profitability.
The same can be said for a low-cost insurer like Molina Healthcare which only recently dipped its toes into the individual market and receives a small fraction of its revenue from these consumers. Furthermore, Molina operates in a number of state-run exchange markets, meaning many of its individual enrollees will still be receiving their subsidies.
As I've said before, we have a number of inflection points on the horizon, and it's going to be critical that consumers and investors stay on top of the latest news coming out of the HHS. By June, my hope is that we'll have a much clearer picture for the future of Obamacare.