Are Uninsured Estimates Overblown?

It seems possible that fewer people will have health insurance at the beginning of 2014 than did at the end of 2013.

This morning, the Barack Obama administration released data on enrollments in the health-care exchanges. If you've been paying any attention at all, the numbers aren't a huge surprise. In the first two months of operation, 365,000 people got as far as selecting plans on the exchanges. A little more than 60 percent -- 227,000 of them -- enrolled through state-run exchanges, with the overwhelming majority of enrollments coming in four states: New York, California, Kentucky and Washington. The rest were on the federal marketplace. About three times that number have been "deemed eligible" for Medicaid or the State Children's Health Insurance Program.

How good you think this is depends on what baseline you use. The administration is comparing it with the first week of October, when basically no one could enroll; obviously, this represents a huge improvement over that. But compared with projections made before the exchanges opened, this is quite low -- about a quarter of what officials were expecting. Unless it accelerates dramatically, the system is going to be well below the 7 million private-insurance enrollments that the Congressional Budget Office forecast for the first year of operation.

In fact, unless it accelerates dramatically, fewer people will probably have health insurance at the beginning of 2014 than did at the end of 2013. Somewhere between 3 million and 5 million people are estimated to have had their insurance policies canceled by the Patient Protection and Affordable Care Act. Some of those people will go on to Medicaid; some will buy policies outside the exchanges. But with premiums rising thanks to all the new coverage mandates, at least a million or two will presumably need to buy exchange policies in the first three weeks of December in order to ensure that they maintain continuous coverage. That doesn't seem impossible, by any means. But it is a heavy lift.

There were, however, some interesting tidbits. For one thing, only about 40 percent of the folks deemed eligible to buy plans on the exchanges have qualified for subsidies, which is lower than expected -- and much lower than I, for one, would have expected in the early months. If you'd asked me before the start, I'd have assumed that early enrollees would be disproportionately old and sick and low-income -- the folks with the most need for insurance and the ones who had the greatest difficulty getting it before.

And that's not exactly wrong: An additional 800,000 people have been "deemed eligible" for Medicaid since Oct. 1, compared with less than half that on the exchanges, even though many states didn't even participate in the expansion. But while I would have expected something like a continuation of that trend onto the exchanges, with the early enrollees disproportionately qualifying for subsidies, instead what we seem to be seeing is a binary result: poor people on Medicaid, middle class and up on the exchanges. A lot of the modest-income folks that the exchanges were supposed to help seem to be missing in the middle.

I can think of a number of explanations for this. One is that the people who created accounts early on the exchanges included a lot of higher-income "lookie-loos" who weren't actually planning to enroll. This doesn't seem all that likely to me -- it's a fair amount of work to get all the way through a subsidy determination, so I'm skeptical that a few hundred thousand folks did it just for fun.

A more plausible possibility is that folks who need subsidies are less likely to have lots of time to spend on a computer, working their way through malfunctioning exchanges. So the early problems could have weeded out many of those who needed subsidies -- people who may return now that the system is more stable.

A third possibility is that we don't have the uninsured problem we thought we had. Most of the estimates we have for the uninsured population are really pretty crude. For one thing, we tend to treat the U.S.'s roughly 48 million uninsured as if they were part of a discrete group, like Mormons or people who know how to play the tuba. But in fact, people change insurance status all the time. If you look at data from the Medical Expenditure Panel Survey, you'll see that a lot of people are uninsured for at least a month, but if you look at who is uninsured for as long as two years, that number falls by two-thirds. If you extend the reference period out to four years, just 7.6 percent of the population counts as "uninsured." That is not a negligible number, but it is less than half of the 48 million we think of as uninsured. And it's heavily skewed toward immigrants and the young:


Notably, this data is also, by and large, self-reported. The census knows that people underreport having health insurance -- the percentage of people recorded as "uninsured" is supposed to represent people who have been without insurance all year, but people tend to tell you their insurance status right now, even if they had insurance a month ago and will have it again when they start a new job.

But they're also self-reporting the data on income. This means that we could have a skewed idea of who the uninsured are, because people tend to tell you their income in fat, round numbers like "$25,000," not the exact actual amount they took in last year. The uninsured might be, as a group, poorer than we expected, meaning that more of them will show up in the Medicaid rolls and fewer will go on the exchanges. Or the uninsured might have been including off-the-books income in their responses to surveys -- income that will not be counted in the Internal Revenue Service data used to make their official eligibility determination.

Our projections are based on what we thought we knew about the uninsured. But what we thought we knew has turned out to be wrong before. In the three years between Obamacare's passage and the time it went into full effect, the law created temporary high-risk pools for those with pre-existing conditions. The Congressional Budget Office projected they would cover 400,000 people, but they ultimately attracted only a quarter of that,even though they relaxed the criteria and undertook aggressive outreach programs. Where were the other 300,000 people who were willing and able to buy insurance but couldn't get a company to sell it to them? It's possible that they simply never existed.

And the same may be true of the legions of long-term uninsured with incomes between 100 percent and 400 percent of the poverty line; there may just not be quite as many of them as we thought. Or there may not be quite as many who are willing to spend their hard-earned money on health insurance. The market for private policies on the exchanges might be smaller than we thought, or it might simply be different -- more affluent, or more likely to be buying gap coverage for a spell of unemployment or an early retirement. Or this could just be a fluke, statistical noise that will smooth itself out by the end of open enrollment. We'll have a better idea on March 31.

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