It's incredible how quickly time flies. Tomorrow will be the last day for uninsured consumers to select a plan on Obamacare's marketplace exchanges.
Open enrollment for Obamacare (officially the Affordable Care Act) kicked off on Nov. 1, 2015, a full 15 days earlier than last year, with hopes high that substantially more uninsured people would enroll this year compared to last year. Official estimates from the Congressional Budget Office peg year-end enrollment for 2016 at 10 million.
By the end of the last open enrollment period (in February 2015), Obamacare had nearly 12 million paying customers. However, enrollment tends to drop off as soon as open enrollment ends. For some people, the premium payment is simply unaffordable, and they drop out. Others have citizenship issues and are dropped from their coverage. The most recent numbers we have are from June 2015 and show a total of just under 10 million paying members -- a 2 million member drop-off from February.
But grading Obamacare's enrollment numbers is always done with some degree of subjectivity. We don't usually know until months later what the final tally is of paying customers, and how certain important factors of Obamacare played out.
However, I'm not much of one for waiting, so let's take a gander at Obamacare's progress through its 11th week (Nov. 1, 2015 to Jan. 16, 2016) and give its performance a preliminary grade. For our analysis, we'll strictly look at the 38 states covered by HealthCare.gov since the data reported by the one dozen states operating their own exchanges can be much tougher to gather and compare.
Total plan selections: B-
According to data released by the Centers for Medicare and Medicaid Services on Jan. 20, total plan selections through the 11th week of open enrollment tallied 8,836,102 -- a nearly 154,000 gain from the previous week.
How does this compare to last year? Through week 11 for calendar year 2015, some 7.75 million people had selected a plan. As a whole, Obamacare enrollment is pacing nearly 1.3 million plan selections ahead of where it was at this time last year. That's pretty good.
However, the wildcard is what happens over the final week of enrollment (namely over today and tomorrow). Americans are notorious procrastinators, and waiting as long as possible also means putting off that first premium payment until the last possible moment without violating the individual mandate (the component of Obamacare that requires everyone to buy health insurance). Last year's open enrollment period saw nearly 1.05 million consumers enroll. Chances are, that figure could be higher this year, but we're obviously unsure how much higher.
Additionally, last year, the government allowed some consumers a little extra time to complete their enrollment beyond the official deadline. There are no guarantees that'll happen this time around.
All told, I'd give Obamacare's plan selection totals via HealthCare.gov thus far a B-minus, with the expectation that they'll finish in the neighborhood of 1.5 million selections higher than last year.
Young adult enrollment: B+
Admittedly, it's been about a month since the CMS has offered an update on plan selections for young adults (i.e., adults under the age of 35), but the data was so intriguing then that I'd still be willing to give Obamacare's efforts in 2016 a B-plus.
Released just prior to the holiday break, CMS data showed that 2.1 million adults between the ages of 18 and 34 had selected a plan by Dec. 15, 2015, which was almost double the 1.1 million plan selections for this same age range by Dec. 15, 2014. It's worth reminding you that open enrollment this year started earlier than last year, and thus allowed consumers an extra 15 days prior to the January coverage deadline to select a plan.
Nonetheless, the data is encouraging in that it suggests younger adults are finally "taking the plunge" and buying insurance. Young adults are critical to the success of Obamacare since they're usually healthy and less likely to go to the doctor. Therefore, the premiums they pay can be used to offset the higher costs associated with terminally ill and older patients who require more medical care.
What we don't know at the moment -- and the only reason I can't yet give Obamacare an "A" for its vast improvement in young adult enrollment -- is whether or not young adults are enrolling because they truly want health insurance, or if they're enrolling because they don't want to pay the shared responsibility penalty. There's been little-to-mixed evidence to suggest that the SRP is working as planned, so understanding the reasoning behind improving young adult enrollment in the coming months should be interesting.
Premium cost inflation: D
If you're wondering where Obamacare has totally dropped the ball, look no further than the rapid rise in premium costs in 2016 compared to 2015.
What's the overall increase consumers are dealing with in 2016? The Kaiser Family Foundation pegged premium cost inflation for 50 major cities across 49 states at a whopping 10.1% in 2016. Per the Hill, based on preliminary data released by the Department for Health and Human Services, premium costs are up 9% on a pre-tax credit basis for plans purchased on HealthCare.gov. In dollar terms, we're looking at the average plan costing a consumer $408 per month, or an average of $113 a month if they happen to qualify for the advanced premium tax credit.
The initial belief when Obamacare became the law of the land was that transparent marketplaces would encourage consumers to use the data available to them more effectively. This should, in theory, result in them selecting lower-priced plans within specific metal tiers, and it should also encourage insurers to be more cost-competitive with one another.
In reality, we've observed that insurers have lost very little of their pricing power. Insurers are required to file premium rate increases with the Office of the Insurance Commissioner in each state where the increase (or decrease) is 10% or higher. However, if there's justification for the increase, there's little the OICs can do -- and the amount of ongoing losses from Obamacare plans for quite a few insurers certainly justify most increases.
I'm giving Obamacare's efforts to control premium costs a disappointing "D" in 2016.
Overall grade: C+
Overall, I'd give Obamacare a passing grade of C+ through the first 11 weeks of open enrollment via HealthCare.gov, but it obviously has more issues to work through.
One of the bigger questions awaiting the program in 2016 is the upcoming general elections. A new president and Congressional makeup could mean big changes are on the way for Obamacare. As long as Barack Obama remains president, it'll be veritably impossible to alter the existing law. However, a new president could wind up altering or repealing Obamacare as we know it.
We'll also want to keep our eyes on that aforementioned young adult enrollment, which looked very strong early on. Personally, I'd like to find out the reasoning behind why young adults now decided to take action as opposed to doing so in 2014 or 2015. That reasoning could have a big impact on Obamacare's long-term success.
Finally, we'll want to pay close attention to health-benefit providers and see how they respond to the 2016 enrollment data. Most insurers appear to be going with the flow and looking for ways to boost enrollment and margins. UnitedHealth Group, though, is looking for the exit and running as fast as it can. The nation's largest health insurer believes it may lose around $1 billion cumulatively on Obamacare plans between 2015 and 2016. Its possible decision to leave Obamacare altogether definitely makes me think twice about the program's long-term potential.
Hopefully by November, once the dust of elections has settled, we'll have more complete answers to these questions -- to the benefit of both consumers and investors.