The Patient Protection and Affordable Care Act, which you'll know better as Obamacare, is currently in the midst of its most important week in terms of enrollment.
Obamacare's most important week has arrived
It's no secret that consumers are procrastinators, and purchasing health insurance is no different. In each of the prior two enrollment periods we've witnessed a surge in enrollment when a monthly coverage deadline, or the enrollment period deadline, came around. Right now Obamacare's marketplace exchanges, which are designed to allow consumers to shop for health insurance in a transparent and competitive environment, should be extremely busy. For HealthCare.gov, which covers 38 states, Dec. 15, 2015 is the cutoff date to enroll in order to have coverage start by Jan. 1, 2016. Some of the individual states are allowing consumers to enroll as late as Dec. 23, 2015 and still have their coverage kick in when the new year begins.
Last year, the week of the Dec. 15 date and the week before were hotbeds for enrollment because consumers wanted their coverage to begin when Jan. 1 hit. Last year's HealthCare.gov enrollment data shows that between Dec. 7, 2014 and Dec. 13, 2014, nearly 1.1 million signed up, with another 3.9 million people enrolling the following week. These two weeks comprised more than half of all HealthCare.gov enrollment for calendar year 2015, just to put things in perspective.
Where are we this year?
According to the latest update from the Centers for Medicare and Medicaid Services, Obamacare enrollment through HealthCare.gov as of Week 5 (Dec. 5, 2015) totaled 2,844,768, with more than 800,000 plans selected over the prior week.
But Obamacare has witnessed a number of changes in its third enrollment period. The employer mandate is taking full effect on Jan. 1, 2016, shared responsibility payments are skyrocketing again, premium costs are rising at a faster pace than at any point this decade, and even the start date for enrollment has shifted forward by 15 days. Enrollment began last year on Nov. 15, and this year on Nov. 1. What this means is last year's weekly enrollment figures by date aren't exactly comparable to this year's. The only way to accurately compare is by comparing enrollment figures to equivalent weeks.
However, when we look at enrollment by specific dates, an amazing thing happens. As of the end of the third week in the enrollment period for calendar year 2015 (which ended Dec. 6, 2014), there were just 1,383,000 people enrolled via HealthCare.gov. Yet, as noted above, through Dec. 5, 2015 there are 2.84 million people enrolled. In other words, Obamacare enrollment, on a by date basis, appears to have more than doubled on year-over-year.
When you look at it that way, Obamacare enrollment looks great on a year-over-year basis, but you'll see below that this is more fiction than actual fact.
Why enrollment figures are so strong
Why have we witnessed such a surge in enrollment? Some of the boost can be attributed to the extra 15 days consumers received prior to the Nov. 15 enrollment start last year. Consumers may be procrastinators, but just shy of 1.1 million people took advantage of the early start time to enroll between Nov. 1, 2015 and Nov. 14, 2015. On the flipside, consumers will discover that the enrollment period ends Jan. 31 this time, as opposed to Feb. 15, which was the end date for calendar year 2015, meaning they won't have those 15 shopping days for the 2016 calendar year.
We could also suggest that substantially higher penalties associated with not having insurance are influencing some individuals to sign up. Personally, I would expect consumers influenced by shared responsibility penalties to jump on board much closer to the Jan. 31, 2016 enrollment deadline in order to delay premium payments as long as possible, but it's possible they've already signed on. Based on a report from the Kaiser Family Foundation, the average individual shared responsibility payment is estimated to jump 47% from 2015 to $969 in 2016. This figure may be providing the impetus to get some of the remaining uninsured to enroll.
It's also possible improved education and advertising are doing the trick, but on a much more selective basis. Insurance giant Anthem (NYSE:ANTM), which is generating a profit from its Obamacare marketplace plans, has suggested that the margins being generated from marketplace plans is below what was expected prior to the health law's implementation. Nonetheless, Anthem has backed its full-year profit guidance and remains steadfast in its attempt to attract more Obamacare-based members.
UnitedHealth Group (NYSE:UNH), the nation's largest health-benefits provider, is a different story. It's yanked its advertising for its marketplace plans in around two-dozen states in an effort to stem its losses. UnitedHealth Group also recently lowered its earnings outlook, and even suggested it may exit Obamacare's exchanges by as early as 2017.
What's next for Obamacare?
Ultimately, Obamacare enrollment isn't going to double in 2016 relative to 2015, but we may be looking at higher enrollment figures (at least through the fifth week) than the Congressional Budget Office had predicted. In terms of reducing the rate of uninsured, this would seem to be a good thing for Obamacare. But, as we saw with UnitedHealth Group, it may not be a good thing for insurers if they're losing money on their marketplace plans.
This year alone we've seen more than half of Obamacare's healthcare cooperatives close their doors. The risk corridor, designed to protect insurers against excessive losses by providing funds from profitable insurers and the federal government, simply doesn't have enough money for all of the low-cost insurers with high medical expense ratios. This is worrisome for the future of Obamacare and for premium prices as a whole, since competition is at the heart of keeping premium cost inflation under control.
There are a lot of variables left to play out before we can declare Obamacare's 2016 enrollment period a success or failure, but my suggestion would be to keep your eyes peeled for the weekly data issued by the CMS to give us clues as to the health of the program.