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The success of Obamacare always rested on getting enough “young invincibles” to enroll on the exchanges. Since the scheme bars health plans from pricing their insurance policies to the actual risk, Washington needs a lopsided share of cheaper young people paying too much in order to subsidize older people who are paying too little.
As many people expected, not enough young folks are signing up to pay the high premiums. But the structural problem could run much deeper. The young people who are enrolling also tend to have more serious (and costly) medical problems.
In short, Obamacare’s young enrollees aren’t invincible enough to underwrite the law’s delicate scheme.
The most compelling proof of this paradox comes from Blue Cross Blue Shield of North Carolina, which recently gave the first significant snapshot of the health status of its new enrollees. The data show that the younger people ages 18-34 enrolling in its exchange plans have much higher prevalence of chronic health problems than the same cohort enrolled in its comparable commercial (non Obamacare) plans. The results were based on a self-assessment survey sent to its beneficiaries.
A much broader survey, released last week by the Kaiser Family Foundation, shows that this finding is probably no fluke. Kaiser’s survey polled consumers on their health status, finding that people enrolling in exchange plans are less healthy than similarly aged people that remained in non-compliant off-exchange health plans.
In the Kaiser survey, 20% of all exchange enrollees described their health status as either “Fair” or “Poor.” This compared to less than 7% of enrollees in non-Obamacare plans. Moreover, only 48% of exchange enrollees describe their health status as “Excellent” or “Very Good.” By contrast, 65% of those who enrolled in off exchange, non-compliant health plans describe their health status in a similar way.
The Kaiser data should worry proponents of Obamacare. While the Blue Cross data was largely dismissed as a potential outlier, the consistency of the Kaiser results show that the North Carolina Blues may be revealing a much broader trend.
It makes sense that younger people who enroll in Obamacare would be those with a higher incidence of serious, and costly health conditions. The exchange plans aren’t priced for healthy consumers. They’re priced for those who plan to use a lot of medical care. The combination of costly mandates that drive up premiums, coupled to high deductibles and co-pays (and cheap, narrow networks of doctors and drugs to help pay for it all) make the plans unattractive to people who don’t foresee big medical bills.
People without a lot of chronic medical problems mostly want to be insured against some of their routine care, and have catastrophic coverage in case they get really sick. That is what people were choosing in the market until Obamacare came along.
The architects of Obamacare will inevitably hail the coverage of so many people with chronic medical problems as a triumph of the scheme. Many young consumers with chronic health problems will surely benefit from the legislation. But the tradeoff between enabling access to affordable coverage for healthier people, versus coverage for those who are sick, wasn’t inevitable.
If Obamacare had created a viable insurance pool, the scheme could have offered more affordable options for everyone. But these one-sized fits all health plans were designed in Washington, not in the marketplace. The result is policies too slim to really benefit the chronically ill (owing to Obamacare’s narrow networks and formularies) and too costly for those who don’t plan to use a lot of medical care.
If the Kaiser survey is a national reflection of the same spectacle experienced by Blue Cross Blue Shield, then Obamacare will end up serving nobody well.
In the Blue Cross survey, 8% of new exchange members ages 18-34 consider themselves in “Fair” or “Poor” health, compared with 4% for Commercial group and 2% for off exchange plans still being sold in the individual market. About 7% of the young people ages 18-34 enrolling in exchange plans have diabetes, compared with 4% for commercial plans and 3% for plans sold in the remaining individual market.
According to the Blues survey, 24% reported having depression, compared to 14% for both commercial plans offered by employers and for plans sold in the remaining individual market. Finally, 13% of respondents reported suffering from chronic pain versus 8% for group and 9% for non-Obamacare plans sold to individuals.
Critics of Obamacare warned of adverse selection in the exchanges. They argued that only older and sicker Americans would find the mix of narrow coverage and high premiums worth the bill. For most observers, adverse selection meant a trend toward enrollment by older beneficiaries. Few anticipated that it would also mean that the younger people who signed up would only be those with health issues.
There’s a pill for the demise of this insurance market. But the architects of Obamacare would never swallow it. A therapy would entail the lifting of all the rules and federal mandates that prevent real competition inside the exchanges — competition not just on price but on benefit design. It would mean returning these markets to local regulation and (in many states) allowing real choice.
But that would mean letting consumers be the ones to decide what insurance packages make the most sense for their individual needs, rather than entrusting these choices to “experts” in Washington. This remedy isn’t on Obamacare’s formulary.
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