There’s a big question mark for President Obama’s healthcare law heading into 2016 — and it isn’t just about how the Supreme Court will rule on the legality of federal exchange subsidies.
Though the Department of Health of Human Services boasted this week that enrollment in Obamacare is consistent with the administration’s expectations, in reality, it has lagged behind original expectations for the second year in a row. The question is, can enrollment make a quantum leap in 2016 just to catch up?
When Obamacare was passed in March 2010, the Congressional Budget Office had projected that enrollment in the law’s insurance exchanges would grow from 8 million in 2014, to 13 million in 2015, and then jump to 21 million by 2016 (a projection that was reiterated in its most recent report).
But as of now, HHS says that just 10.2 million signed up and paid premiums (which only met HHS’s downwardly revised target). That means that the number of enrollees will have to double next year to meet CBO projections of 21 million.
Regardless of what the Supreme Court decides about the legality of federal exchange subsidies later this month, reaching 21 million will be a challenge. Especially because in the first two years, Obamacare may have already signed up the low-hanging fruit — those who had the greatest need for health insurance.
The number of enrollees isn’t of arbitrary importance, either. Insurers require a broad enough pool of enrollees to manage their risk and keep premiums stable.
A big reason why insurers are proposing rate increases for 2016 is that the first year of claims data revealed a group of enrollees that is older and sicker than they originally hoped for. In 2016, insurers still can count on three federal programs meant to absorb some of risk they’ve taken on: risk adjustment, risk corridors, and reinsurance. But the later two programs are scheduled to expire after 2016, leaving the industry more exposed and making it all the more imperative that insurers sign up enough enrollees to stabilize the risk pool.
It’s true that even though the formal open enrollment period for 2015 has ended, people in special circumstances (such as those losing their job-based health coverage) can still enroll, which means the number of enrollees could exceed 10.2 million by year’s end. But last year, the opposite happened. In April, Obama announced the healthcare law had signed up 8 million for coverage. By November, that number had been revised down to 6.7 million, because a number of those who initially signed up failed to pay premiums and HHS incorrectly counted dental plans.
One factor the administration has going in its favor is that the penalties associated with the individual mandate are scheduled to increase. In 2014, the penalty for going without insurance was $95 (or 1 percent of household income above the filing threshold of $10,150) and by 2016 it will rise to $695 (or 2.5 percent of household income above the filing threshold). This could act as an added cudgel to convince younger Americans to sign up those who have thus far proven elusive.
But if this doesn’t work, and enrollment substantially lags in 2016, insurers could be spooked enough into stepping away form the exchanges, driving up rates even further and placing the program’s sustainability in doubt.
