Affordable Care Act implementation in recent months has seemed like a car on an icy road. Will it end up in a ditch or regain control and head down the road? Nearly four months into implementation it is still too early to know for sure.
But in spite of the disastrous launch of healthcare.gov, there are signs that the reform is finally gaining traction. We will not have a definitive idea of whether the ACA is meeting its goal of making affordable coverage available for another year or so (final 2014 coverage numbers and 2015 premiums will be the most telling), but early data released by the Department of Health and Human Services (HHS) provides the most comprehensive snapshot to date.
The news is mixed. Enrollment though healthcare.gov accelerated rapidly in December, suggesting that the consumer-facing side of the website is finally working adequately. Open enrollment ends March 31, so there is still time to bring enrollment up to par. But the New Jersey marketplace enrollment numbers in the HHS report were not impressive. A total of 34,751 individuals in New Jersey had selected a marketplace plan by December 28. This is unimpressive in light of the more than one million uninsured in New Jersey.
Comparing the number signing up in New Jersey to New York is also discouraging. New York has just under twice as many uninsured individuals as New Jersey, but four times as many individuals selected a marketplace plan according to HHS, about 157,000 enrollees.
New York’s health insurance exchange, which is managed by the state, has worked better than the federal exchange on which New Jersey and 33 other states rely. A much greater level of effort to reach the uninsured with information about coverage options may also help explain New York’s better performance. The vagaries of the ACA led to much more funding for education and outreach in states operating their own exchanges compared with states relying on the federal marketplace. And New Jersey has not stepped up with its own effort to educate the public.
The HHS report had much is better news on New Jersey Medicaid. Over 71,000 people were determined by the federal marketplace to be eligible for Medicaid coverage. The comparable number in New York is only slightly more, just over 93,000. Medicaid enrollment here is likely to be even higher than the federal statistic indicates. Unlike the system for obtaining private insurance subsidies, people eligible for Medicaid are not required to enroll through the federal marketplace; they can enroll through a state website or at a county social services office.
The HHS report also gave us the first “tea leaves” about the mix of people signing up for private coverage through the marketplace. It did not report data on health status, but it did on age, a reasonable proxy for health. As many observers have noted, the December marketplace numbers skew toward older individuals. This is certainly true compared with the New Jersey uninsured population (see the table). This data truly is just tea leaves because we can expect that older and sicker individuals would be first in line to sign up.
Comparing the early marketplace experience to New Jersey’s individual insurance markets in place prior to the ACA adds some perspective on reform implementation. In the early 1990s, the New Jersey Legislature enacted a major overhaul of health insurance regulations, including many features that became cornerstones of the ACA, such as community rating and guaranteed issue (unlike the ACA, these NJ reforms included waiting periods for pre-existing conditions).
At first, enrollment and premium trends looked good, but within a couple of years New Jersey’s individual market enrollment started falling rapidly with premiums spiraling upward. Our research shows that these trends were driven by an older and sicker enrolled population, with the most generous plans experiencing the most rapid decline.
Recognizing that this market was unsustainable, in 2003 the legislature created the Basic & Essential Plan, which offered very limited benefits at much more affordable premiums. Toward the end of 2013, the B&E represented nearly two thirds of individual market enrollment. And, as shown in the Table, the B&E attracted a disproportionately young cohort. The residual “standard plan” market, on the other hand, skews toward an older and, no doubt, sicker population. The age distribution of early buyers of marketplace plans falls in between the two types of products in the pre-reform New Jersey individual market.
For most enrolled in standard plans, the marketplace offers comparatively favorable premiums. Some B&E enrollees will not see the marketplace as a good deal, particularly if they were happy with very thin benefits. But the HHS data show that very few marketplace plans offering limited benefits at comparatively low premiums have sold so far. In fact, the least expensive option available those under age 30 – called catastrophic plans – have barely sold at all, making up only 1 percent of plans selected in the marketplace. The comparatively low-premium Bronze Plans that are available to all marketplace purchasers made up only 12 percent of plans selected so far. This suggests that the more than 100,000 individuals who will be losing their B&E plans this year have not yet jumped into the marketplace. This is not yet a cause for alarm, B&E enrollees are allowed to keep their coverage until the end of their plan year, which can be as late as December 2014.
The history of New Jersey’s individual market is instructive. When only plans offered at a community rate with limited pre-existing condition waiting periods were on the market, enrollment rapidly skewed to older and sicker individuals, premiums rapidly became unaffordable, and many left the market. We certainly do not want to relive that history, but I don’t think we will. The ACA has numerous features to prevent that fate, including the requirement to buy coverage, subsidies to bring plans within reach of modest-income families, and an array of risk adjustment mechanisms to boost financial viability of this market. Reading the HHS data tea leaves may be of little more help than getting one’s fortune told with real leaves at the bottom of a cup, but the data releases in the next few months will be much more telling. In the meantime, maybe we should all hold our breath just a little bit.