Obamacare Enrollment Hits 7 Million, Putting Downward Pressure on 2015 Premiums; Word-of-Mouth Spreads the Truth

(Updated March 31)

As the “train wreck” called Obamacare pulls into the station it’s becoming clear that some 7 million Americans are signing up to purchase insurance in the Exchanges. Ten days ago I went out on a limb and predicted that we would hit 7 million, if not by March 31, by early summer. Now it appears that we’ll break through that target by midnight.

Seven million was the Congressional Budget Office’s (CBO’s) initial estimate, but when the roll-out proved rocky, the administration lowered its expectations to 6 million. Reform’s opponents groused that this still was too optimistic, and before long the consensus estimate fell to 4 to 5 million. (Conservatives, who had helped lower the consensus, then accused Democrats of moving the goal-post to make it easier to claim success.) 

                             Younger Americans Join the Pool

Who are these last-minute shoppers? According to the Wall Street Journal,carriers are beginning to report that many are under 40.  Today, more insurers confirmed the trend. This should come as no surprise.

We always knew that people in their 50s and 60s would join the Exchanges first. Healthy 20-somethings and 30-somethings who rarely see a doctor would be in no rush to sign up. Why begin paying premiums before you have to? 

                                          Momentum Builds

Now, younger Americans are  jumping into the pool, and, most importantly, the pace of enrollments is building. Friday, March 28, Charles Gaba, the “numbers Geek” who has correctly predicted earlier enrollment milestones, wrote: “We’re in uncharted territory. . . Things are moving VERY quickly now, and events are quickly overtaking my ability to keep up.”  Yesterday (Saturday, March 29), Gaba hiked his March 31 estimate to 6.7 million, up from 6.22 million earlier in the week.

Keep in mind that, in most states, anyone who gets on line before the March 31 deadline, begins an application, and experiences technological difficulties, can complete that application in April.  By the time those late entries are tallied,enrollments will top 7 million. How high will they go? All bets are off.

                                      Some in the Media Downplay the News

Inevitably, enterprising journalists are trying to distinguish themselves from their colleagues by finding a new angle on the story: “National Enrollment Looks OK, But States Matter More,” NPR’s Julie Rovner declared.

Newsweek’s Zach Schonfeld was downright snarky:: “Obamacare Reaches Its Target. Can We Stop Pretending That Number Matters Now?” According to Schonfeld, whether 6 million or 7 million people sign up, this is a “minor victory for the president.”

What Schonfeld fails to understand is that what matters is not the number of people who have enrolled in a particular state, but the momentum. The sudden surge suggests that as the number of people who have bought insurance reaches a critical tipping point, the public’s view of Obamacare is changing.

Indeed, a recent Kaiser Foundation study reveals that the public is warming to reform. Over the past two months the share of respondents who supported the ACA rose from 34% to 38%. Tellingly, since February, opposition among the uninsured has dropped 11%, while support had increased by 15%.

A significant majority oppose repealing Obamacare. Fifty-nine percent of those surveyed said they wanted Congress to either “keep the law in place and work to improve it,” or simply “leave the law as is.”

What is happening?  Over the past two months, as more Americans bought coverage, they began talking to friends and relatives who, until now, didn’t know who or what to believe about the Affordable Care Act (ACA). Now those friends are learning about premiums and generous government subsidies from people they know and trust. At last, the fog of disinformation is lifting, and the reality of Obamacare is sinking in.

By early summer, we’ll see the effect even in states where enrollments have lagged.Just in the past two days, sign-ups in Red States have surged. Who knows? Maybe the mainstream media will replace anecdotes about “Obamcare’s victims,”  with the facts that people need to know..

Today Kaiser’s polling shows that about one-third of the uninsured are not aware that the law includes subsidies that could help them buy insurance. Forty percent to 50% don’t know about the most popular provisions of the law: the guarantee that people cannot be denied coverage–or charged more– because of pre-existing conditions; the expansion of Medicaid ;and  the rule eliminating out-of-pocket costs for preventive care.

Perhaps our newspapers and networks will begin tospread the word that, thanks to government subsidies,  millions of people who will be able to buy a “zero-premium policy.”

               Who Knew That Insurance Could Be Free?

That’s right. What most people don’t know—and what Fox News hasn’t been telling them–is that that roughly 6.5 million Americans will be able to purchase insurance without paying a penny.  The insurance will cost them nothing because the tax credit that they receive from the government will cover the entire cost of a bronze plan.

Who will qualify? In the fall Credit Suisse published a table revealing that, in many states:

  •        an individual earning somewhere between $11,490 and $20,100;
  •        a family of three with joint income under $34,170; 
  • ·      and a family of four earning less than  $41,200

will be able to find a $0 premium bronze policy.

McKinsey & Co, a leading global management consulting firm, agrees, and estimates that roughly half of those 6.5 million will be under 39.

Even if a family’s household income is somewhat higher, many will discover that, after applying the government subsidy, health insurance may well cost significantly less than their monthly cable bill.

Based on that analysis, back in September,  Credit Suisse’s Ralph Giacobbe predicted that “affordability may not be a roadblock” to achieving the CBO projection that 7 million people will buy insurance in the exchanges in 2014. “Simply put,” he wrote, “we don’t see any logical reason why anyone in this population wouldn’t take free healthcare coverage vs. remaining uninsured.”

But, Giacobbe added, much will depend on “education, outreach and logistics /IT.”

As we all know logistics/IT didn’t work out very well—though as time passes, that matters less and less. (Granted, even today, there were computer glitches, but they were fixed quickly) And it’s clear that his month’s outreach effort worked. Going  forward I believe that word-of-mouth will continue to drive “education.”

                                            A “Tipping Point”

Many of us who had read the law knew that once people experienced Obamacare, they would like it. Now I think we have reached that threshold where “an idea, trend, or social behavior crosses a threshold, ‘tips’, and spreads like wildfire.”  Just enough people have signed up, and are happy with the policies that they have found, that others are learning the truth about the Affordable Care Act.

In the months ahead it will become harder and harder for reform’s opponents to confuse the public with half-truths and outright lies. People will say, “But that’s not what happened to my brother, or my neighbor next door.”

                                        Desperate Deniers

Little wonder,  reform’s opponents are getting desperate. In a last-ditch effort to deny reality, they are claiming that we can’t count someone as enrolled unless they have paid their first month’s premium.

But as Gaba explains, “the percentage of enrollees who haven’t paid that initial premium “is a rolling average. People who enrolled between 2/16 and 3/15 don’t even start coverage until April 1st, while anyone who enrolls between 3/16 – 3/31 won’t start coverage until May 1st.

“In many cases, their first month’s premium won’t even be due until up to 6 weeks or more after they enroll.  . . it’s silly to write these people off as deadbeats. The vast majority of these will eventually be paid up; it’s just that we won’t have confirmation of many of them until well into May.”

After all, how many people do you know who pay their bills before they get them? How many pay two or three weeks before they are due?

                                               2015 Premiums

Finally, as enrollments soar, what will this mean for Exchange premiums in 2015? Will they really “sky-rocket” as so many for-profit insurers want us to believe?

No. Climbing enrollments will mean larger, more diverse pools which, in turn, will attract more carriers vying for market share. Because of the way the Exchanges are designed, they will have to compete on price.

But that’s my next post.


18 thoughts on “Obamacare Enrollment Hits 7 Million, Putting Downward Pressure on 2015 Premiums; Word-of-Mouth Spreads the Truth

  1. The numbers enrolled thru the Exchanges do not reflect the total because many people who did not qualify for a subsidy enrolled directly with insurance companies. That means the actual number will be over 7 million or more.

    I am an insurance broker in Tucson, AZ and half of my new enrollments were people who went directly through insurance companies. This weekend I enrolled a 62 year old psychologist in a Gold PPO plan for $530 per month. $0 deductible and $3500 MOOP.

    In Arizona we have a competitive market and reasonable premiums, even without subsidies. Unfortunately, enrollments through the exchange may not hit 100,000 due to all the lies put out by anti-Obamacare forces.

  2. Denise–

    You’re absolutely right; Nationwide millions of people who don’t qualify for subsidies are enrolling outside the Exchanges. Some are doing this because they want to pick a plan that includes certain doctors and hospitals.

    As a result, when you add together the new enrollments inside the Exchanges and outside the Exchanges, probably 9 million people will have new insurance by May–maybe more.

    The good news is under the ACA insurers have to follow all of the same rules, whether they are selling policies inside or outside the Exchange: they have to cover all essential benefits, can’t charge more for pre-existing conditions, must offer free preventive care, and must cap out of pocket spending.

    Best of all, these sales also will put downard pressure on Exchange premiums. Any insurance company that sells both inside and outside the Exchange must consider these customers part of one risk pool.

    Since the folks who buy outside the Exchange are more affluent that Exchange shoppers (i.e. they don’t qualify for subsidies) they are likely to be healthier. (In general wealthier people are in better health than low-income people.) So as they join the risk pool, it becomes a less expensive group for the carrier to insure.

    It sounds like you found a good deal for your client.

    And even if Exchange enrollments don’t hit 100,000 this spring, as word spreads about the good deals that are available, my guess is that we’ll continue to see people
    enrolling outside the Exchanges throughout the summer.
    And any who experiences a major change in life circumstance (loses a job, marries, has a baby, divorces,
    turns 26 and ages out of a parent’s plan, or graduates from
    college and loses the insurance he had at school) will be
    able to sign up in the Exchanges even though the open enrollment period has ended.

  3. Maggie, I look forward to your write ups on the Healthcare coverage & am waiting for part 2 of the media coverage article & Wall Street Journal’s response to you. I’m a supporter of this law & am rooting for success. You’ve taken time to answer a few questions for me not too long ago, thanks. For some reason my earlier post today did not take, so here I go again. The subsidies make no sense, in some cases. I’ve gone on Covered California, Kaiser Foundation’s subsidy calculator, & HealthSherpa. Take a couple earning $62k, ages 58 & 62, they would receive nearly $10k in a year for a subsidy of about $880 monthly—but add $100 to that yearly income, $62,100 & the subsidy is 0. That makes no sense to me. I hope I missed something!

    • Janice-

      I went to the KFF subsidy calculator and put in the ages and income you cite.
      You said they were in California, but didn’t say what town , so I put in the zip code for Los Angeles.

      I found that they would receive a subsidy of:$7,425 per year
      (which covers 56% of the overall premium) amount they would pay :$5,890 per year
      (which equals 9.5% of their household income and covers 44% of the overall premium)

      But, You Are Right-when I upped their income by just $100, they receive No tax credit.

      Something is wrong here. It could be the Kaiser calculator (though I greatly respect KFF).
      Or it could be something that I don’t understand about the way subsidies are calculated.

      I’m going to figure this out–I will get back to you.

    • Hi Janice–

      I’ve put in a call to a source who should be able to explain how these subsidies are calculated.

  4. I’m very happy to see the surge in enrollment numbers. WH and other groups’ pressure campaign to get folks signed up worked pretty well. But one thing I hope this WH and hopefully another Dem WH after 2016 will tackle is cost control. In some states like Georgia, premiums are so high even with gov subsidies. Many southern states which have the most unhealthy populations are ironically hurt because of high premiums. Medicaid expansion in so many red states would be a great starter for a lot of people.


    • Andrew–

      Yes, red states really need to expand Medicaid. Many of these are poor states–and many people are suffering.

      One thing to keep in mind, however, is that federal subsidies keep up with premiums. In other words, if I live in a part of George where my monthly premiums are high, I will get a larger subsidy to make up the difference, than someone who lives in a city where premiums are only $250.

      Premiums are as high as they in rural Georgia in part because not enough insurers are competing. Competition would force them to lower their prices in order to get market share.

      In another state, politicians would have made a greater effort to encourage other insurers to come in. For instance in many state
      new non-profit “co-op” insurance carriers (consumer owned and operated plans) that are run by the customers are offering very low premiums.

      But probably Georgia’s politicians just aren’t that enthusiastic about helping the Obamacare Exchanges.

      Still, by next year, another carrier may well see the opportunity and come in.

  5. Janice–

    I emailed Larry Levitt. Here is his reply:

    There is indeed a “cliff” at 400% of the poverty level for many people.

    Subsidies phase out gradually (if a bit steeply) from 100% of poverty to 400% of poverty. But, people with incomes above 400% of the poverty level are not eligible for subsidies at all, so the subsidy drops to zero at that point. For some people – those who are younger or in lower cost areas – that cliff is small or non-existent because their premiums are low and therefore their tax credits are low by the time their incomes get up near 400% of poverty. But, for people who are older or in higher cost areas – with higher premiums – the effect can be quite dramatic, as you found.

    Hope this helps.

    Larry is right– I hadn’t quite taken in the fact that the couple you describe is so very close to the 400% of poverty cut-off. (People who earn more than 400% of poverty are not eligible for subsidies. They are already over median income–in other words, more than half of all American couples earn less than this couple.)

    As Larry points out, if you are older your premiums are higher (insurers can charge you 3 times as much as they would charge a 20-year-old for the same policy.) And because you premiums are higher, your subsidies are much larger.(The subsidies keep up with the premium)

    So a 63-year old would receive a much larger subsidy than a 23-year old—If he qualifies. But once he crosses the 400% of poverty line what he “loses” (because he earns to much) is also much larger.

    Finally, if the couple you describe contributed more to an IRA (or opened one). they could lower their “modified adjusted gross income” (the number that is used to
    represent “income” for the purposes of qualifying for a subsidy. For someone that close to the threshhold , this would make sense.

  6. Thanks for the answer Maggie (& Larry too)…contributing to an IRA would be a great way to lower the MAGI. Health Savings accounts were also listed in what could be deducted, so I need to look into how that works! Just for fun, I really enjoyed looking at the Twitter account of Senator Ted Cruz where he asked people to respond with a yes or no on whether “Obamacare” was good or bad. He was inundated with positive remarks! Must have put his Knickers in a Knott 🙂

  7. Hi again, looks like, & boy am I confused, that only 401k contributions aren’t factored into MAGI—here’s what I found out:
    MAGI and 401(k)
    “Although IRA contributions are counted as MAGI income, 401(k) contributions aren’t. The Fairmark investment-guide website says this gives you a strategy for avoiding the nasty effects of a high MAGI. If you think your MAGI this year is, say, going to restrict your Roth contributions, increasing your 401(k) contributions lowers your gross income, and your MAGI with it. MAGI not only affects your Roth, but education-expense write-offs and the earned income tax credit.
    If funding your 401(k) doesn’t do the trick, deferring some of your income to next year might help lower your MAGI. For example, you could ask your boss to delay your December bonus until January, or, if you have your own business, hold off billing customers until then. This only works if your income’s going to be lower next year. One good bit of news — if you convert money from an IRA to a Roth IRA, the conversion isn’t included when you add up your MAGI for the year.”–

    My thoughts are if there are those who aren’t lucky enough to have an offer of a 401k at their employment, they aren’t even able to deduct an IRA contribution–It looks again like something that benefits us more fortunate (my husband & I contributed nearly $20k to ours)—hope I missed something on this too

    • Janice–

      It is confusing. MAGI is defined differently for different purposes.

      What you are quoting has to do the degree to which MAGI might restrict Roth contributions.

      That’s different from the definition of MAGI when it comes to getting subsidies in the Exchanges.

      Here’s advice on how to lower your MAGI so that you qualify for a subsidy in the Exchanges:

      If you use the healthcare exchanges and you’re going to be close to the modified adjusted gross income threshold and are in danger of losing out on those exceptionally valuable tax credits, here are some things that you can do to reduce your taxable income:
      Contribute to a traditional 401k. If you are eligible for a 401k at work, contribute enough to get yourself under the threshold. Ideally, you’re at least contributing enough to maximize your employer match, if it is offered.

      Contribute to a traditional IRA. If you are not eligible for a 401k, or there is no employer match, you can contribute instead to a traditional IRA. By contributing to a traditional IRA, assuming that you are eligible, you can reduce your taxable income by the amount that you contribute to the IRA.

      Harvest investment losses. If you have investments that are now priced lower than your original purchase price, you can sell them for a capital loss. Make sure you do not repurchase those investments within a 30 day window or you will have a wash sale, meaning you cannot claim the loss.
      Defer year-end bonuses. If you’re due to get a bonus at the end of the year, speak with your employer to see if you can get paid in the following year rather than at the end of the year. This will defer the income; perhaps you can alternate years in which you receive bonuses, so that in, for example, 2014, you receive no bonus, but in 2015, you receive a bonus on January 1 and on December 31.

      Above is from http://www.hullfinancialplanning.com/how-the-obamacare-subsidy-threshold-could-make-you-pay-a-lot-more-for-health-insurance/