Why Obamacare Can Survive Without A Perfect Demographic Mix

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To anyone who will listen, the White House has been emphasizing and re-emphasizing that the key to Obamacare’s success isn’t what raw number of people signs up for health coverage — it’s who signs up.

That has partially been a case of backtracking after HealthCare.gov’s early troubles had made the administration’s raw enrollment goals difficult to achieve. But it’s also true. Insurance carriers can’t discriminate against older and sicker people anymore, so they need young (and presumably healthier) people to balance them out.

And now we’ve gotten some of the first numbers from state-based Obamacare marketplaces, providing the initial glimpse of the demographics of the first wave of enrollees. Here are the percentages of enrollees between ages 18 and 34, from six states, including California, the most populous:

  • California: 21 percent
  • Colorado: 18 percent
  • Kentucky: 32 percent*
  • Maryland: 25 percent
  • Rhode Island: 20 percent
  • Washington: 18 percent

At first glance, those figures don’t look all that great. But the full story is a bit more complicated. (The Obama administration hasn’t released any demographic data on Obamacare enrollees from the 36 states being served by HealthCare.gov yet.)

So let’s break down the numbers.

First off, how many young and healthy enrollees Obamacare actually needs to work economically has become a source of serious and often conflicting discussion. There’s no bright line, some percentage above which the insurance market is guaranteed to flourish and below which it is doomed to a death spiral.

Prior to the law’s Oct. 1 launch and all the reshuffling that followed, the administration said that it was aiming for close to 40 percent of Obamacare enrollees to be young. In the months since, senior administration officials have added a little context to that goal: every state and every insurance company has its own risk pool, which needs its own mix of young and healthy.

But — again, it’s complicated — Obamacare might not actually need to hit the 40 percent mark to be financially stable. The respected Kaiser Family Foundation released a report last month concluding that if young adults composed 25 percent of the enrollee pool, then a minimal (one to two percent) premium increase might follow — likely not enough to send the law into the death spiral (sicker people lead to higher premiums, so healthy people drop out, rinse and repeat) that critics have warned about.

The early numbers from the states show them mostly lagging behind that 25 percent threshold. But those percentages are likely to change as enrollments continue through the end of March. First, young and healthy people are not as a whole as desperate to sign up for insurance and tend to wait until the deadline approaches. Second, the numbers of enrollees in general in the last three months of the sign-up period has always been expected to be higher than the first three months — and that’s especially true now after the website problems at launch.

So more people overall enrolling, and a higher percentage of them being younger, should increase the current numbers significantly.

“My expectation is that there will be another surge in enrollment in March, and that it will include larger numbers of young people,” Larry Levitt, senior vice president at the Kaiser Family Foundation, told TPM. “So long as young adults ultimately make up a quarter of enrollees or more, the effect on premiums will be small. I’m encouraged that the early enrollment figures from the exchanges are even close to that in most places.”

A senior adinistration official described the Massachusetts experience to TPM, when that state rolled out its health reform law in 2007. During each of the first three months of enrollment, young adults made up 17, 17 and 24 percent respectively of the sign-ups, a pretty close match to the proportions in these states under Obamacare.

But in each of the final three months, young adults accounted for between 34, 36, and 34 percent, respectively, a significant jump. The administration is anticipating a similar surge for the national law, the official said, which would put the law closer to the original goal.

As for the most extreme consequences of the pool not consisting of enough young enrollees, experts have also been cautioning that the law provides protections for that, too. Obamacare’s reinsurance program, for example, should help insurers offset the costs in the event of an unexpectedly sick risk pool.

“It speaks to the overstated fears that people had about the death spiral. It shows that even at these lower numbers, that simply isn’t going to occur,” the official said. “And understanding the history in Massachusetts, when younger people came in at the end, it speaks well about the stability of the marketplace.”

*Editor’s note: Kentucky’s demographic report does not differentiate between Medicaid and private coverage enrollees.

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