Wednesday, August 13, 2014

Downward Spiral: If You Hate Your Plan - You Can Drop It

As Many As 1 in 3 Obamacare Enrollees Already Dropping Out

In a predictable yet disturbing twist, Obamacare enrollment is dwindling far too rapidly for insurer comfort.  The good news is that after the newly insured endure PPACA Exchange plans' narrow networks, astronomical deductibles, and unaffordable co-pays, it is no more difficult than tying one's shoes to generate one of Obamacare's 22 freshly minted "please don't vote us out of office" exemptions

At InsureBlog, Patrick Paule authored a column summarizing how and why PPACA's, ahem, "affordable" plans have begun the march toward charging you more for less coverage. In part, Patrick wrote:
[T]he policy standards [for Obamacare's] ... cost sharing component must be updated annually. The formula they use to set the maximum is based on average premiums per enrollee based on employer sponsored insurance (not individual!). This data comes from the National Health Expenditure Accounts. They throw these numbers into their magic formula and presto, they have a new percentage. For 2015 it is 4.21%. This results in a new maximum annual out-of-pocket limit of $6,600 for singles and $13,200 for families. Wait, what? HHS is protecting consumers from 'Excessive Out-of-Pocket Expenses' by increasing our potential costs by $250 a year? Yep, they are.
Hence, as premiums escalate at two to three times inflation, enrollees will be asked to pay more in premium and in out of pocket costs at the point of delivery. Needless to say, this is a recipe for disaster.  The first insurer reports are surfacing on enrollment patterns seven months into Obamacare and as many as 30% of those enrolling have already chosen to drop their plans. 

After crowing at PPACA's "successful" launch by pointing to the fact that 8 million people had decided to go online and place a plan in their shopping cart in the spring, the Obama Administration has been silent on the topic throughout the summer. Remember, under ACA-math "signed-up" did not mean paid.  This taxpayer funded, multi-billion dollar Rube Goldberg Machine had no way to differentiate between actual paying customers and internet looky-loos. 

ObamaCare exchange statistics should clear up any doubt as to why the Obama Administration has been tight-lipped about enrollment since celebrating 8 million sign-ups in mid-April. 
Reality, evidence suggests, could require quite a come-down from those lofty claims. 
The nation's third-largest health insurer had 720,000 people sign up for exchange coverage as of May 20, a spokesman confirmed to IBD. At the end of June, it had fewer than 600,000 paying customers. Aetna expects that to fall to "just over 500,000" by the end of the year. 
That would leave Aetna's paid enrollment down as much as 30% from that May sign-up tally....
The returns are admittedly early but Obamacare needs to grow in headcount to remain actuarially sound.  And that is not happening.  Initial reports from the State of Washington as well as insurer, Cigna, also indicate that the tide of discouraged outweighs any new sign ups.  Unfortunately, we have no official statement from the federal government, since it stopped reporting the numbers after issuing the high-water mark of 8 million in the spring. 

From the 8 million looky-loos our government claimed as "enrolled" most insurers reported that only 80% to 85% ever made a payment on their plans.  This additional enrollment atrophy reported in the state of Washington and by Cigna and Aetna are in addition to that earlier leakage. 

That means that approximately 6.8 million people ever payed for an exchange plan. And if we assume that just 20% (as opposed to Aetna's higher 30%) end up dropping coverage throughout the year, we will end up with something like 5.3 million who enrolled in and paid for Obamacare.  Recall that by December of 2013, 5.6 million Americans had lost their plan due to cancellations spurred because the plans did not comport with PPACA's mandates in some way. 

That leaves us with a rather bleak picture. It isn't as simple as deducting the 5.6 million from the 5.3 million to show a zero (or negative) net increase in coverage because some of those 5.6 million who lost their plan went onto an employer plan, spouse's plan, or bought a new plan on their own outside of the exchanges. Of course some also decided to go uninsured and take advantage of one of those two-dozen exemptions and others signed up for Obamacare. 

But what we can clearly say is that this law fully up-heaved 5.6 million Americans who'd shopped for, budgeted for, purchased, and maintained an individual insurance plan that was best for them. They were then forced to pay an average of 40% to 50% more for lesser plans so that they could fund new plans for 5.3 million Americans who, for whatever reasons, had not undertaken the same insurance procurement path.  And this does not address the turmoil PPACA has caused, and is about to wholeheartedly unleash in the employer-sponsored insurance market.  If the employer mandate is enforced as scheduled in 2015, the impending restraints on employment as organizations scramble to push employees to part-time so they may avoid penalties will suffocate on an already anemic job market.  

So no, if you liked your plan, you couldn't keep it. But at least when you hate your plan, you can drop it.  Reminiscent of a little early 1990's Ugly Kid Joe ...