Obamacare: The Metrics In The News Are Mostly Wrong
A few weeks ago the Obama Administration reported that enrollment in the new insurance marketplaces topped four million through the end of February, then five million by mid- March, showing steady progress since the website woes of October. News organizations jumped on the numbers. Would they get to six million enrollees this year, a target many use for the law? If they do, do they have enough young adults to balance the risk pool? If they don’t, won’t premiums skyrocket? The scorecards were out.
Story after story followed essentially this pattern, which has now become the familiar metric for judging year one success for Obamacare. Here’s how it goes. If the law gets about six million enrollees nationwide and a decent percentage of them are young people, the risk pool will be stable and premiums next year will be reasonable. Year one will be a success. If it doesn’t the law will be in trouble and year one will be a failure. The problem is that just about everything about this narrative is wrong. It’s the equivalent of judging the local weather from national averages.
The six million number is an estimate made by the Congressional Budget Office (CBO) for year one enrollment in the new insurance marketplaces. They downgraded their estimate from seven million after the website woes slowed early enrollment. CBO estimates are made to gauge impact on the federal budget. Their purpose is not to judge the success or failure of the program. While it is true that the greater the number of enrollees the higher the likelihood of a balanced risk pool, six million is not a magic number.
How about the percentage of young people? Everyone seems focused on that. Young people benefit the risk pool because they are healthier, but it’s really the percentage of healthy people that make or break the risk pool. Even if enrollment of young adults stays where it is – at about one-quarter instead of 40%, which our analysis shows they make up among potential enrollees – premiums would only increase by two to three percent. Though even that isn’t quite right, since many insurers expected this and already built it into their premiums. Nevertheless, news organizations continue to hammer enrollment by young adults as if it were the sole make-it or break-it factor to the health of the risk pools and, in some news reports, the law. There are no data yet on the overall health of enrollees because the law no longer allows insurers to collect that data in order to exclude people with pre-existing conditions from coverage.
Also, there is no national risk pool, so the percentage of the six million who are young or anything else doesn’t matter all that much. Under the law risk is pooled at the state level, so what matters is the risk profile in each state and there will be variation across the country with more and less balanced risk pools in different states. Premiums themselves are set on a smaller geographic basis, so they will vary even more depending on market competition and other factors in local markets.
Of course getting to six million has become a political milestone and that won’t change. But the real questions are: Are the premiums (net of the tax credits the government is providing) affordable to people? Will they be stable or begin to spike in year two in some parts of the country if the risk pool is worse than insurers expected? Do people who get coverage under the law think it’s a good deal or not? Does enrollment ramp up as expected over time, decreasing the number of Americans uninsured? The current focus on national enrollment numbers and signups by young adults doesn’t tell us a great deal about the answers to these questions, and they are not a good metric by which to judge year one success.
The problem is that it will take time to learn if the mix of enrollees is healthier or sicker, and how premium increases vary around the country, and how people feel about their coverage. Meanwhile Republican politicians will lambast the law and Democratic ones will offer lukewarm support and overall popularity of the ACA probably won’t change very much. Anybody willing to wait for a judgment based on the right metrics?