In order for Obamacare to work financially for insurance companies a large segment of those who sign up for insurance via exchange must be the young and healthy (some have said that number must be at least 1/3 of the total). It is the “young” who generally don’t need money paid out to them, who will be paying for the older enrollees who require more health insurance payouts.
According to a new WSJ Report the universe of people signing up for Obamacare is skewing older than expected raising early concerns about the economics of the insurance marketplaces. If the trend keeps on this way, costs for exchange insurance will be even higher.
We need a broad range of people to make this work, and we’re not seeing that right now,” said Heather Thiltgen of Medical Mutual of Ohio, the state’s largest insurer by individual customers. “We’re seeing the population skewing older.”
The early numbers, described to The Wall Street Journal by insurance executives, agents, state officials and actuaries, are still small—partly a consequence of the continuing technical problems plaguing the federally run exchanges, experts say. HealthCare.gov, the federally run marketplace serving 36 states, is suffering serious technical problems that have prevented many people from signing up.
While the report blames the older skew on the failures of the website which drive away tech savvy younger people. And surely that is part of the problem, but just because people are young, they are not idiots. The younger tech savvy set also realize they are being expected to carry the financial weight for their older neighbors. As conservatives have been warning for the three years since the bill was passed, it is much cheaper for them to pay the tax rather than pay for the insurance.
The average enrollee age at Priority Health, a Michigan insurer, has ticked up to age 51 for newcomers, from about 41 years old for plans offered for the current year, said Joan Budden, chief marketing officer. Arise Health Plan, Wisconsin’s largest nonprofit insurer, said more than half its 150 signees are over 50, a higher proportion than expected, while declining to be specific on its target age.
Industry experts cautioned that, a month into the health law’s enrollment period, it is too soon to say what insurers’ final pool of members will look like. Medical Mutual, for instance, has seen health-law enrollments so far in the “low triple digits,” and Priority Health has seen fewer than 100. Both are selling on the federal exchange.
A White House official said the Obama administration expects most young, healthy enrollees to wait until the last minute to sign up, citing research showing that pattern when Massachusetts embarked on a similar health overhaul in 2007. People have until Dec. 15 to enroll in coverage starting Jan. 1, with open enrollment for coverage during the year lasting through next March.
This is even happening in the state-run exchanges
In states that are running their own marketplaces and have seen smoother rollouts, officials are now also reporting a similar phenomenon, suggesting the economics of the law play a role, too. In Connecticut and Kentucky, which have enrolled more than 4,000 people each in private health plans so far, the largest segments of enrollees in new commercial health-law plans are over age 55, much older than industry actuaries say they had anticipated. Each state ultimately expects to register several hundred thousand people in their exchanges.
Age expectations for enrollees vary by market, but one adviser and several insurers said an average age of around 40 would be a typical target.
The more difficult it is for a person to sign up, “the more danger there is of having a bad risk pool,” said Jim Whisler, an actuary for Deloitte Consulting LLP, which advises health plans participating in the marketplaces. “Indications to date are that that is playing out,” he said.
The Obamacare law does provide for insurers getting federal funds if they underestimate the costs, howeveractuaries say if the overall pool of customers is significantly older than expected, those provisions may not be enough to protect insurers against losses.
Those who are complaining about the sticker shock when they are forced to purchase an exchanges plan, are going to get really hit should this trend continue.
Read the full WSJ story here.