Obamacare Is Only Human
It turns out that most people who enrolled in health insurance for 2014 through HealthCare.gov didn't bother going back to the site to shop around for better prices for 2015. That means they will pay higher premiums than necessary. It also raises a separate question: What's the point of having options if so few people use them?
Obamacare exchanges work like this: People buying coverage on the individual market can go to a website, where private insurers offer plans with standardized benefits. That makes it easy to compare prices, which gives insurers an incentive to compete on cost. Those costs are in turn heavily subsidized by the federal government.
So far, that's worked: Premium growth has been lower than expected, helped by competition among insurance companies and prompting praise even from those who otherwise can't stand the law. And people are signing up; the government is set to beat its 9 million target for next year. Let's say it again: Obamacare is mostly a success.
But the fact that so few exchange enrollees are price-shopping between years introduces some concerns. The Department of Health and Human Services said today that as of last Friday, just 1.3 million people who had coverage through HealthCare.gov went back to the website either to re-enroll in their plan or to choose a new one. That's less than 25 percent of the 5.4 million who enrolled on the federal exchange for 2014.
(And that probably overstates the degree to which people are shopping around. HHS hasn't said how many of those people looked at other plans for the new coverage year, let alone signed up for one. It's not hard to imagine that many of those 1.3 million people went back to the site simply to re-up their existing plan, unaware that if they had done nothing they would stay in that plan anyway.)
That small number is problematic for two reasons. First, the prices of plans change from year to year, which means people will see their premiums increase. That's compounded by the way the subsidies are calculated; shifting plan prices will mean that some people see their subsidies fall, further increasing their actual costs.
Here's a second problem: If people aren't shopping for better prices during each open-enrollment period, it's hard to see what incentive insurers have to keep competing on price. Yes, premiums still matter for people new to the exchanges. But exchange enrollment is expected to plateau starting in 2016. The appeal of price wars may plateau with it.
HHS is aware of this. Last month, it proposed a rule that would let people signing up on the exchanges for the first time ask to be automatically enrolled for future years not into their existing plans, but into the lowest-cost plan with similar benefits. (HHS hasn't said whether it would make that the default option.) In other words, HHS would provide the incentive to insurers that customers seem uninterested in.
If the government starts assigning people to health plans -- and the latest enrollment figures demonstrate why it should -- then it's worth asking what separates the exchange model from the health-care system that dare not speak its name: single payer.
As in a single-payer system, the government pays most of the cost for exchange coverage (though through a tortured system of tax credits, rather than directly). Like single payer, the exchange model offers coverage regardless of medical background.
If enrollees no longer choose their own plans (at least after their first year of coverage), what differences does that leave? What benefit stems from the existence of large private insurers, aside from determining the lowest prices that health-care providers are willing to accept -- which the government can then impose, by channeling enrollees to those plans?
That question is facetious, but only just. The best way to justify the U.S. attachment to health insurance run by private insurers, which leads to higher administrative costs with no commensurate increase in quality, is the allure of choosing who covers you. These latest numbers suggest that allure isn't so strong after all.
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