It's an anxious time of the year for health-benefit providers, and it has nothing to do with injuries caused by Black Friday sale mobs.
Beginning on Nov. 1, 2015, the marketplace exchanges for the Affordable Care Act, better known as Obamacare, opened for a third time since becoming the law of the land. Although enrollment is critical for the success of Obamacare and insurers each and every year, 2016 is an especially important enrollment period considering that insurance premiums are rising at their fastest rate in about a decade, and the penalties associated with non-compliance with the individual mandate are also rising by a large percentage. You could say this is the first major price-based challenge that Obamacare is facing, and no one is exactly sure how it'll turn out when enrollment ends on Jan. 31, 2016.
Obamacare delivers solid gains through week 3
Data published last week from the Centers for Medicare and Medicaid Services, or CMS, suggests that top-line enrollment so far is moving along at a faster pace than in either of Obamacare's first two years.
Through the first three weeks of enrollment last year (keep in mind that enrollment began on Nov. 15 last year), 1,383,683 plans were selected through states covered by HealthCare.gov. Of those selecting plans, 48% were new consumers, 52% were renewing their coverage, and more than 2.5 million people submitted an application to determine if they were eligible for any form of financial assistance.
Based on the CMS data from last week, plan selection via HealthCare.gov rose by 19% to 1,645,698 through week 3, with 35% of enrollment coming from new customers and 65% of enrollment comprised of renewals. Overall applications submitted also jumped to more than 2.9 million. The Congressional Budget Office has projected an increase in total enrollment for calendar year 2016, and the plan selections thus far have proven that we may actually see healthy gains in year-over year marketplace enrollment.
This Obamacare enrollment statistic plunged -- should we be worried?
However, one key figure in the CMS' data has dropped substantially on a year-over-year basis: the number of consumers who are window shopping on HealthCare.gov. Based on data from CMS, just 2.4 million consumers window shopped since the beginning of November for the current enrollment period, compared to nearly 3.1 million consumers who window shopped through the first three weeks last year -- a drop of 22%.
This year-over-year drop could be completely benign, or it might signal something quite worrisome. Though it's likely too early to tell, here are three possible reasons why HealthCare.gov window shopping has dropped off so much this year.
First, it's possible that an improved employment outlook, as well as the implementation in full of the employer mandate for businesses with 50 or more full-time-equivalent employees, has made an impact. If more consumers are being covered through their employers, we would expect window shopping on HealthCare.gov to be reduced without it having an adverse effect on insurers or Obamacare as a whole. This would be the best possible case scenario.
Another possibility is that consumers are simply allowing their marketplace exchange to reenroll them in their existing plan. Not every state has an auto enrollment feature in place, but in states that do, a number of individuals took advantage last year by not having to do a thing in order to reenroll. Aside from being extremely convenient, reenrolling should allow nearly all consumers to keep their current primary care physician and in-network care providers.
Why's this possibly bad? It's not necessarily bad for insurers or Obamacare as a whole, but it may be a bad move on the part of consumers who are ignoring what could be better deals available to them. The Department of Health and Human Services has suggested that enrolled consumers are leaving as much as $2 billion on the table by purchasing plans in their respective metal tiers that aren't the cheapest, but that do meet their care needs. By reenrolling without visiting HealthCare.gov in the more than three dozen states now assisted by the federal government, millions of consumers could wind up overpaying for their health premiums by failing to shop around.
Finally, it's possible that consumers are simply scared off by the large rise in insurance premiums for the 2016 calendar year, and they're either planning to hold off for as long as possible to buy health insurance (i.e., the end of January 2016), or they may pass on buying health insurance altogether. Doing so would subject the uninsured to the non-compliance penalty, which in 2016 will be the greater of $695 or 2.5% of an individual's modified adjusted gross income. Even though the penalty for not having insurance has jumped dramatically in each of the past two years, it's still likely much lower than paying for health insurance over the course of a year. Consumers might be realizing this and simply choosing the penalty instead in order to save money. This would be a worst case scenario for Obamacare, as it could mean more insurers struggling to become profitable based on plans offered through marketplace exchanges.
Time will tell
Why window shopping has dropped off so much really is anyone's guess right now, and only time is going to tell why we're seeing the numbers the CMS reported last week. But that doesn't change the fact that a lot is at stake this year.
In fact, last month UnitedHealth Group lowered its full-year profit forecast on account of losses sustained through its Obamacare plans and hinted that it may no longer offer plans through Obamacare's exchanges beginning in 2017. The company also suspended advertising pertaining to its Obamacare plans in the hope of minimizing its losses, which are coming from sicker individuals enrolling for health insurance.
In sum, I would suggest paying very close attention to what's normally an overlooked data point in CMS' weekly reports. It could be something benign, but if consumers are actively avoiding Obamacare's exchanges because of affordability, insurers and Obamacare could have a major problem on their hands -- and that could affect you as a consumer and as an investor.