Don’t Panic Over Early Health Reform Enrollment Data

New federal data show that enrollees in health reform’s new health insurance marketplaces are somewhat older than some expected, spurring talk that premiums could rise and even that the law itself is at risk.

But it’s no time to panic, for several reasons.

• First, it’s early.  People have until March 31 to enroll in marketplace coverage, and enrollment will likely grow substantially by then.  The new data show a swell of enrollment among younger people in December, and federal officials said they expect that to continue.

• Enrollees’ health status matters more than their age in determining whether the marketplace has a balanced, stable risk pool.  A 20-year-old with significant health needs costs an insurer more to cover than an older person who doesn’t use many medical services, and insurers need healthy people of all ages to balance out the pool.  (As the Kaiser Family Foundation’s Larry Levitt tweeted:  “Will we get the 60-year-old gym rats?”)  We aren’t likely to know the relative health of marketplace enrollees for some time — until enrollees start using health services and insurers examine their claims data.

• Whether the pool is balanced is a state- and insurer-specific question.  The new data show national and state-specific enrollment in the insurance marketplaces.  But 2014 risk-pooling occurs within each state and on an insurer-by-insurer basis; it also includes enrollees in the individual market outside of the marketplaces as well as marketplace enrollees.  When thinking about how the 2014 risk pool could affect what premiums insurers charge in 2015, what really counts is how accurately a particular insurer predicted the mix of people it would enroll in its plans in a given state when it set its 2014 premiums (and what it expects for 2015).  If an insurer’s enrollees are in poorer health, on average, than the insurer predicted for 2014 and the insurer expects the trend to continue in 2015, it could raise premiums for 2015.  But if actual enrollment was in line with expectations, there should be no effect on premiums.

• Even a sicker-than-expected pool of enrollees won’t necessarily translate to significantly higher premiums in 2015.  Insurers will weigh a number of factors when they set their 2015 premiums, such as who they expect to enroll next year and how their prices will stack up next to their competitors.  Some companies will want to keep premiums down to maximize their market share as more people become familiar with health reform’s benefits and enroll in marketplace plans, and as the penalty for not having health insurance further encourages healthy people to obtain insurance.  In addition, health reform already includes several programs to compensate insurers if their costs are higher than expected, and insurers will factor that into their 2015 premium rates.