Thursday, December 12, 2013

Why Are So Few Signing Up in Exchanges and Even Less Qualifying for Subsidies?

This is from Megan McArdle at Bloomberg

A ... possibility is that we don’t have the uninsured problem we thought we had. Most of the estimates we have for the uninsured population are really pretty crude. For one thing, we tend to treat the U.S.'s roughly 48 million uninsured as if they were part of a discrete group, like Mormons or people who know how to play the tuba. But in fact, people change insurance status all the time. If you look at data from the Medical Expenditure Panel Survey, you’ll see that a lot of people are uninsured for at least a month, but if you look at who is uninsured for as long as two years, that number falls by two-thirds. If you extend the reference period out to four years, just 7.6 percent of the population counts as “uninsured.” That is not a negligible number, but it is less than half of the 48 million we think of as uninsured. And it’s heavily skewed toward immigrants and the young. ...

Notably, this data is also, by and large, self-reported. The census knows that people underreport having health insurance -- the percentage of people recorded as “uninsured” is supposed to represent people who have been without insurance all year, but people tend to tell you their insurance status right now, even if they had insurance a month ago and will have it again when they start a new job.

But they’re also self-reporting the data on income. This means that we could have a skewed idea of who the uninsured are, because people tend to tell you their income in fat, round numbers like “$25,000,” not the exact actual amount they took in last year. The uninsured might be, as a group, poorer than we expected, meaning that more of them will show up in the Medicaid rolls and fewer will go on the exchanges. Or the uninsured might have been including off-the-books income in their responses to surveys -- income that will not be counted in the Internal Revenue Service data used to make their official eligibility determination.

Our projections are based on what we thought we knew about the uninsured. But what we thought we knew has turned out to be wrong before. In the three years between Obamacare’s passage and the time it went into full effect, the law created temporary high-risk pools for those with pre-existing conditions. The Congressional Budget Office projected they would cover 400,000 people, but they ultimately attracted only a quarter of that, even though they relaxed the criteria and undertook aggressive outreach programs. Where were the other 300,000 people who were willing and able to buy insurance but couldn’t get a company to sell it to them? It’s possible that they simply never existed.

And the same may be true of the legions of long-term uninsured with incomes between 100 percent and 400 percent of the poverty line; there may just not be quite as many of them as we thought. Or there may not be quite as many who are willing to spend their hard-earned money on health insurance. The market for private policies on the exchanges might be smaller than we thought, or it might simply be different -- more affluent, or more likely to be buying gap coverage for a spell of unemployment or an early retirement. Or this could just be a fluke, statistical noise that will smooth itself out by the end of open enrollment. We’ll have a better idea on March 31.