Comparing Apples to Oranges

Young adults, or as Obamacare likes to call them – “young invincibles”, have been the talk of the nation since the day Obamacare was implemented. As an industry basic, young, healthy individuals are required to balance the risk pool and reduce the liability of health insurance coverage on the insurance carriers. These healthy individuals, generally classified in the age group of 18 to 35, do not utilize the services of emergency rooms and hospitals as much as their older, unhealthier counterparts. In essence, the onus of balancing out the equation is heavily dependent on these healthy individuals.

Enrollment of young invincibles has been in the crosshair of industry experts since the beginning of the ACA. The center of many discussions has centered on how to engage this demographic. Several reasons have been cited for the lack of interest from this demographic toward federal health insurance marketplaces.

1)    Higher premium costs – The insurance premiums for young adults under ACA are higher than what this demographic is used to paying. They are not getting incentive for being healthy and requiring less service, and are having to pay somewhere around 200 percent more than their older premiums.

2)    Emergencies are costlier, even with insurance – One primary advantage of having health coverage is the reduced cost of emergency services. However, even with insurance, emergency services will cost somewhere around $2,791, which includes annual premiums and other, out of pocket costs. For an uninsured individual requiring emergency assistance, the out of pocket costs come out as $2,022.

State Exchange

The data released by the administration on enrollments is another indication that young individuals are shunning the Obamacare marketplace. According to statistics available in late February, only 27 percent of the 4 million enrollees that have signed up on the exchanges fall in this demographic. These abysmal numbers are a cause for worry. However, in the privately held insurance marketplaces, the story is very different.

Private health insurance exchanges, which are marketplace models based on the online health insurance shopping mechanism, are showing much better enrollment numbers. Taking a look at eHealth, a long standing private health insurance exchange, 40 percent of enrollments have come from young invincibles. For the period of October to December 2013, eHealth received 169,000 enrollments, out of which 40 percent were from this demographic. Maintaining the sanctity of the shared data, eHealth maintained that the data only contains 10 percent of previous enrollees who were applying for new insurance in lieu of their older, canceled plans. As compared to the federal marketplaces, which disclosed a 24 percent enrollment from the target population in this period, this 40 percent number is a lot better and very close to what the administration wants from federal marketplaces.

The Congressional Budget Office has estimated that in order to prevent Obamacare from collapsing, there needs to be at least 40 percent of healthy individuals enrolled with the system. While federal online marketplace hasn’t achieved that number, the individual market is definitely showing the right numbers. Most of the credit goes to the flawless performance of these private health insurance exchanges, especially in a period where the Obamacare marketplaces were struggling with different technical glitches and backend errors. It is evident that the young population smartly avoided the pitfalls of a broken marketplace and got their health insurance from the private market.

A clear takeaway from the data available from eHealth is that the risk pool is not entirely lopsided. If you take a look at the overall data available by combining the individual exchange data and the federal exchange data, the demographics and the balance looks a lot better than what the federal exchanges are portraying.

In this improving scenario, there are some quick steps that the government can execute on priority for fixing the localized federal risk pool.

1)    The government should make the healthcare.gov website a flawless piece of work. No errors, no backend problems, and no performance issues would encourage the tech savvy younger crowd to enroll through the system and avail subsidies simultaneously.

2)    Since private exchanges are performing much better than the federal marketplace, these sites should be able to process individuals who qualify for federal subsidies. It is estimated that roughly 9 million people fall in the income group of $11,500 to $46,000 a year. If these private exchanges are already seeing traffic from this group, allowing their enrollment would only improve the balance of the risk pool.

The nation’s mood is changing toward retaining and fixing Obamacare and all its associated benefits. By taking the above steps, the administration can establish a lasting appeal to the crowd it has been targeting all along. Once a good chunk of the “young invincibles” comes aboard, Obamacare’s true potential will be unlocked.

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