Obamacare’s Longshot: Assessing The Exchange Enrollment Derby

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The following recently appeared on the Forbes blog.  It is available online here.

By Katherine Restrepo, Health and Human Services Policy Analyst at John Locke Foundation and Chris Conover, Forbes Contributor

The race for people to #GetCovered through Obamacare’s state and federal health insurance exchanges has officially crossed the wire.  In its sixth and final enrollment report released late last week, the Department of Health and Human Services disclosed that a total of 8 million individuals have signed up for an Obamacare compliant plan within the individual health insurance market.

When it comes to measuring the enrollment race’s all around performance, perhaps we can compare it to this past weekend’s Kentucky Derby.  The Derby brought out the best and worst from its participants, yet it is just the first race of the grueling Triple Crown.  Obamacare likewise has more enrollment races to endure in the future.  And measures of performance will vary based on short-term and long-term projections.

As we’ll see Republican-controlled states won the short-term race yet Democrat-controlled states have an edge in the longer race. Here’s how we reach that conclusion and what it means.

Defining Performance on the ACA Health Exchanges

The chart below and companion spreadsheet uses two alternative measures of performance.   The short-term metric that has been used by many other commentators focuses on 3/31 enrollment as a percent of target enrollment.[1]  This is based on the targets set by Centers for Medicare and Medicaid Services back in September.  An alternative long-term measurement is the number of individuals who have selected a marketplace plan as a percentage of the entire eligible Exchange population.

The Short-Term Race: Enrollment as a Percent of Target Enrollment

Using the short-term formula, Republican-controlled states (having both a Republican governor and Republican control of both chambers of the state legislature) won the race handily by greatly exceeding their targets by a healthy 41%.  Split-Control states placed second, meeting 96% of total targeted enrollment (although states having a Democrat in the governor’s seat slightly outperformed split states led by Republicans).  States dominated by Democrats finished last at 91% (even though such performance is not at all bad in absolute terms).

Of course, this race was not exactly on a level playing field. When it set targets originally, CMS was relying on an aggregate figure put out by CBO of 7 million projected Exchange enrollments in 2014.  But some states with their own Exchanges set their own targets (all but three of the 11 states that set their own targets were Democrat-controlled; none fell into the Republican-controlled category).  Because these states generally chose aggressive target enrollment figures, it meant that when CMS deducted these targets from the 7 million and allocated the balance to the remaining states, the targets across these remaining states unavoidably were less ambitious.

How do we know this? Because when we compare first-year target enrollment against the maximum hypothetical number qualified to enroll in Exchanges, the figure for Democrat-controlled states (35%) is nearly twice as high as the comparable figure for Republican-controlled states (19%).

The Long-Term Race: Enrollment as a Percent of Potential Enrollment

Thus, when we examine the long-term "race," it turns out that Democrat-controlled states have a slight lead over Republican-controlled states in this first leg. We leave it to experts in public management to decide whether it is better to set an ambitious target and miss modestly or a less ambitious target and win by several lengths. But it is worth mentioning that setting an ambitious benchmark was no guarantee of getting better results.

To take the most egregious examples, Massachusetts and Oregon set some of the most ambitious targets (ranking 2^nd and 4^th respectively on targets as a share of potential enrollments). But they ended up 48^th and 33^rd respectively in terms of actual enrollments as a percent of potential enrollment. Indeed, Oregon’s Exchange worked so badly that it is being scrapped entirely — a train wreck measured in hundreds of millions in squandered federal and state taxpayer dollars.

Indeed, with the exception of Nevada, every single one of the seven states widely viewed as having had severely dysfunctional Exchange websites (Oregon, Maryland, Massachusetts, Vermont, Minnesota, Nevada, and Hawaii) is Democrat-controlled.  Put another way, 6 of 15 (40%) of Democrat-controlled states operated severely dysfunctional Exchanges. Fellow Forbes contributor Jeffrey Dorman reports that $1.27 billion in federal dollars was invested in the Exchanges in these 7 states (which, by our count, collectively signed up 308,285 enrollees) — a cool $4,119 per sign-up.[2] Got that?  These states spent nearly as much just signing people as the $4,410 that the CBO estimates will be spent per person on Exchange subsidies for those who qualify!  Readers can judge for themselves whether there’s a lesson to be learned from that.

Why Did Republicans Do So Well Despite General Opposition to Obamacare?

Overall, 34 states surpassed their defined benchmarks.

Republican states generally have a distaste for the coercive manner in which the federal health law attempts to "reform" health care, yet 17 of the 23 states in this group greatly exceeded their enrollment targets.  While we cannot rule out good governance/ competent management as an explanation, we would be the first to concede that other factors were also at play, certainly in some states.

One of these is that many of these states did not elect to expand Medicaid.  In 12 of those 17 states, individuals living between 100-138% FPL now have heavily subsidized private coverage instead of Medicaid.  For example, here in North Carolina, 183,000 individuals live within this income bracket, making them eligible for an Exchange plan.  This added pool of eligibles greatly facilitated the state to reach its target enrollment of 191,000.

Other reasons help explain how North Carolina handily outpaced its exchange enrollment targets. This may be the case for other Republican-led states as well. In a prior post, Duke colleague Don Taylor  succinctly explains what happened here:

North Carolina has relatively high uptake (and a very high proportion of those signing up who are eligible for subsidies) primarily because of private organizations that have worked closely together to encourage/facilitate sign ups. These were groups likely to be in touch with persons who were uninsured, and who had incomes above the coverage gap. These groups include the Community and Rural Health Centers and FQHCs, OFA, Doctors for America, Legal Aid, and others. Further, while some states enacted laws making it illegal for navigators to go into health department waiting rooms, North Carolina has not done this, enabling access to a place where persons who were uninsured might be expected to be found. I don’t really know how BCBS NC compares to dominant insurers in other states in terms of outreach efforts.

However, the long term performance of both individual states and the program as a whole remain a big unknown.  For now, Democrat controlled states lead the way with enrolling 32% of their total eligible exchange population.  Mixed states have signed up 23%, while purebred Republican states account for 27%.  So we are very far from the finish line. And keep in mind that these weak figures exist, despite an enrollment kick in the last quarter mile of the first mile in a 3 to 4 mile race.

Conclusion

Skeptics know that the federal health law’s embellished enrollment performance cannot by itself determine its measured success in the long run.  Many other important questions have yet to be answered by the White House.  In the meantime, other policy experts and research entities have urged a focus on some critical unknowns, such as estimating the number of Exchange enrollees who were previously uninsured, or how many individuals have actually paid their first month’s premium:

• The recently released RAND survey shows that only 36 percent of Exchange enrollees were previously uninsured. Yet the government’s most recent marketplace report shows that 87 percent of those applying for financial assistance on the Exchanges (i.e., 95% of enrollees) self-reported having no health insurance.
• According to the House Energy and Commerce Committee, roughly 65% of the federal Exchange population has done so.  Yet some experts such as Avalere president Dan Mendelson claim the payment rate eventually will settle out at 90-95 percent.

Which of these disparate figures is true may well determine whether  this law has the stamina for the long haul.  Obamacare can only be faithfully executed if it seriously reduces the number of uninsured and provides accessible and affordable health care.  The ever-evolving black letter law has made itself grow weaker due to its plethora of extended deadlines and extra-legal maneuvers.  It will be interesting to keep track of the chart’s long-term enrollment metrics, especially after insurers post their 2015 rates this month.  The widely anticipated increase in premiums could very well slow the pace of enrollment in future years.  More problems will arise once individuals find out that they are either underinsured and cannot afford a high deductible health plan coupled with an expensive monthly premium, even for those eligible for financial assistance.  Each day, more Exchange plan members realize the limitations of the plan they selected either in terms of their scope of coverage or narrowness of their networks. By the looks of things, Obamacare’s a longshot — certainly not a pony we’re inclined to put any bets on.

Update #1: May 6 

It’s official: Massachusetts is joining Oregon in entirely scrapping its ACA Exchange website. Boston Globe reports: "Massachusetts plans to scrap the state’s dysfunctional online health insurance website, after deciding it would be too expensive and time-consuming to fix, and replace it with a system used by several other states to enroll residents in plans….Massachusetts had the first online health insurance marketplace in the country, created under its landmark 2006 law mandating coverage for most residents. The website worked well until it was revamped last year to meet the demands of the federal Affordable Care Act."

Worth noting in the same article: "Massachusetts is among four states that have been under pressure from the Obama administration to fix their faulty websites, said John E. McDonough, a professor of public health practice at the Harvard School of Public Health. The others — Maryland, Minnesota, and Oregon — "seem to be getting more attention," he said."

[1] The administration characterizes the 8 million Exchange enrollees as having enrolled by March 31, even though it includes additional special enrollment period (SEP) activity occurring as late as Saturday, April 19^th. Since the White House originally announced 7.1 million had enrolled as of March 31, it appears that nearly 900,000 completed their enrollment process after March 31. Nevertheless, for purposes of analysis, we count the entire 8 million, not just 7.1 million.

[2] Lest one chalk this up to mere out-of-the-gate stumbles, consider this. These 7 states had collectively enrolled about 286,000 people through February. Thus, their last month’s enrollment amounted to just over 22,000 people — less than half the 57,000 monthly number they’d managed to achieve in the first 5 months.

READ CHRIS’S BOOK, The American Health Economy Illustrated (AEI Press, 2012), available at Amazon and other major retailers. Follow @ConoverChris on Twitter, and The Apothecary on Facebook. Or, sign up to receive a weekly e-mail digest of articles from The Apothecary.

INVESTORS’ NOTE: The biggest publicly-traded players in Obamacare’s health insurance exchanges are Aetna (NYSE:AET), Humana (NYSE:HUM), Cigna (NYSE:CI), Molina (NYSE:MOH), WellPoint (NYSE:WLP), and Centene (NYSE:CNC), in order of the number of uninsured exchange-eligible Americans for whom their plans are available.

We realize those without 20:10 vision may have difficulty reading some of this table. Those wishing to see a full-blown version or interested in doing their own calculations can find both the table and raw data used to generate it here.

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