November 13, 2013
Dear Friends and Colleagues:
Earlier today, HHS released the initial enrollment figures for the new insurance marketplaces. While these numbers are low, the White House is absolutely correct: these early data are not in any way indicative of future enrollment. But the real reason that the White House is right is itself fascinating. Further, it points to larger policy issues about the timing of future open enrollments.
Take-Away #1: Currently-insured persons likely represent the bulk of the initial “wave” of interest in the new marketplaces. This group includes persons who face cancellations of their existing individual coverage – or who may benefit from dropping their unsubsidized individual coverage and transitioning to a subsidized health plan on the marketplaces. These individuals have and presumably still want coverage – and they are highly likely to enroll prior to the end of 2013. Given that the existing individual market consists of roughly 11 million people*, the marketplace enrollment to date is likely disproportionately comprised of persons transition from unsubsidized individual coverage.
Take-Away #2: The uninsured (particularly those who are younger or relatively healthier) appear not to have been disadvantaged by the early glitches with the marketplaces. As recent polling evidence from Gallup** suggests, the vast majority of uninsured individuals have not yet attempted to go online or sought out assistance with the marketplaces. The timing here is consistent with the financial calendars of these American families: as a group, they are disproportionately lower income and, particularly during the fourth quarter, they devote most of their consumption to holiday spending (not health insurance).*** Consistent with this explanation, we would also expect enrollment in Medicaid (which typically has no premium) to far outpace enrollment in the tax credits subsidies (which requires premium payments by enrollees) early during in the open enrollment period – which is exactly what we are now seeing.
Take-Away #3: Uninsured Americans who qualify for partially-subsidized coverage will sign up in early 2014 when they have the discretionary income to pay their new premiums. Robust enrollment will not take place until the IRS begins to distribute $325 billion in tax refunds**** in the first quarter of 2014. Until that time, these consumers are cash-strapped between the holiday period and the moment when their refund checks arrive.*** Further, the IRS delay in the opening of the tax season (and the associated delay in the timing of refunds) means that many uninsured consumers will start shopping for coverage from the marketplaces only at the end of the open enrollment period, which is currently slated to end of March 31, 2014.
Conclusion: The White House is right not to worry. But the reasons for calm point to the need for the marketplaces to sell insurance when uninsured Americans feel they have the financial wherewithal to buy the health plans on offer. The White House will no doubt consider this when contemplating the optimal open enrollment period in subsequent years.
For friends in the media, all statements are on the record. Please feel free to contact me at email@example.com or 615-761-6929 if I can be helpful in any way.
* Kaiser Family Foundation, “Individual Insurance Market Competition,” (2011), available at http://kff.org/other/state-indicator/individual-insurance-market-competition, accessed on November 13, 2013.
** See, e.g., Gallup polling results at http://www.gallup.com/poll/165776/uninsured-americans-ignoring-health-exchange-sites.aspx, accessed November 8, 2013.
*** Many different sources of financial data prove this point, but historical data about outstanding consumer credit by month reported by the Federal Reserve provides a particularly striking example; see http://www.federalreserve.gov/releases/g19/HIST/cc_hist_r_flows.html, accessed November 13, 2013. See also Berk, Christina Cheddar, “Survey: 45% of Americans would prefer to skip Christmas,” November 19, 2012, CNBC.com, available at http://www.nbcnews.com/business/survey-45-americans-would-prefer-skip-christmas-1C7155109, accessed November 13, 2013.
**** Internal Revenue Service, Statistics of Income Division, July 2013, Table 3.3, available online at http://www.irs.gov/uac/SOI-Tax-Stats-Individual-Income-Tax-Returns-Publication-1304-%28Complete-Report%29#_tbla, accessed November 13, 2013.