The Obamacare marketplaces will be open for business next month, but with far fewer customers than anticipated. Luckily for President Obama's team, open enrollment lasts through March, and it has some leeway when it comes to meeting its goals.Earlier this year, the nonpartisan Congressional Budget Office predicted that about 7 million people would sign up for Obamacare during the six-month open enrollment period. The administration embraced that figure, and before the open enrollment period opened in October, Health and Human Services Secretary Kathleen Sebelius said to NBC, "Success looks like at least 7 million people having signed up by the end of March 2014."
Enrollment, however, began at a snail's pace because of all the technical problems with HealthCare.gov, the federal Obamacare website serving 36 states. The website has improved dramatically, but by the end of November, only about 365,000 individuals had selected plans from HealthCare.gov or a state-based Obamacare website.
In mid-December, a Health and Human Services Official insisted the agency is "on track" to meet its 7 million enrollment goal and expects most people to sign up at the end of the open enrollment period. At the same time, the administration has shifted the focus from the raw enrollment figures to the demographic makeup of the marketplace."What we need is the right mix of individuals in these individual exchanges," White House deputy press secretary Josh Earnest told reporters in mid-December. "My point is, you can't evaluate the success or failure of the Affordable Care Act based solely on the number of people who sign up all across the country. What you should do to evaluate the success of the program is to consider the mix of people who have signed up in each of the individual marketplaces."
So far, the administration hasn't released any demographic information about Obamacare enrollees.
The correct "mix" includes a sufficient portion of younger, healthier people -- a portion equal to their representation in the overall pool of potential individual market enrollees. That would mean about 40 percent of the market should be younger, healthier enrollees; in a market of 7 million, that's 2.8 million.
The concern has been that if only older, sicker people join Obamacare, the costs of covering that market would leader to higher premiums. That would, in turn, prompt even more healthy people to leave the market, leading to the dreaded "death spiral." The death spiral is unlikely to happen in large part because of mechanisms built into the Affordable Care Act to prevent that. In fact, even if far fewer young, healthy people sign up than expected, the impact on the Obamacare markets would be relatively minimal, some argue.
"Even in what I think is a worst-case enrollment scenario, premiums would only go up by two-and-a-half percent," Larry Levitt, a senior vice president at the Kaiser Family Foundation, told CBS News. "It would be better to get a good mix of enrollees, but it wouldn't make or break the program if you don't."
Levitt and his colleagues at Kaiser Family Foundation simulated the effects of two different enrollment scenarios. They found that even if young adults only made up 25 percent of the market rather than 40 percent, overall costs in individual market plans would only be about 2.4 percent higher than premium revenues. Given that insurers set premiums to achieve a 3-4 percent profit margins, they'd still be making money. They would, however, likely pass on that increased costs to customers in the form of higher premiums -- though hardly high enough to risk the "death spiral."
Even if enrollment is very low by the end of March -- with relatively few younger, healthier customers -- the market will have a chance to recover. Rick Curtis, president of the Institute for Health Policy Solutions, co-wrote an article pointing out that a substantial number of people should be expected to enroll in an Obamacare plan during "special enrollment periods," which accommodate people experiencing certain life changes such as becoming a citizen, getting married, or moving to a new coverage area.
"When we think about the uninsured, we think about the currently uninsured," Curtis explained to CBS News. However, he said, "there will be many more people becoming eligible over the course of 2014."
Those who enroll before 2014 matter the most to insurers, since those customers can be charged for the whole year and will help determine premiums for 2015. However, given the unexpectedly slow pace of enrollment, the "special enrollment" customers may be "an important consideration" Curtis said. Furthermore, those customers will be, on average, relatively young and healthy, he said.
One other key factor when it comes to evaluating Obamacare is the fact that each state has its own marketplace. So while HHS may be aiming to have 7 million enrollees nationwide, some states could have more robust marketplaces than others.
"If you enroll a bunch of young people in California, that's not going to help you in Texas," Levitt said. "So we could see states where the market is quite stable and others where premiums might go up because young people are staying away."
That variation might be exacerbated by different levels of outreach in the states. Levitt pointed out that states running their own Obamacare marketplaces were able to draw from a federal grant pool to pay for outreach efforts. However, there's little money for outreach in the 36 states that are letting the HHS run its marketplaces.