Lack of Young Enrollees Means Higher Costs, Will it Happen?

The insurance industry seems to be collectively holding its breath until the end of ObamaCare’s open enrollment period in April.

The highly- anticipated demographics of enrollees over the first half of open enrollment revealed that 24% of the 2.2 million people enrolled in (but haven’t necessarily paid for) coverage on a state or the federal exchange were between the much-needed ages of 18 to 34. On the flip side, nearly one-third of enrollees are ages 45 and up.

Critics of the law say if younger and healthier people are not a major part of the insurance pool to offset the costs of older and less healthy enrollees, an averse risk death spiral could occurs and push prices up across the board.

Under the Affordable Care Act, every individual in the country has to have insurance by the end of open enrollment period on April 1 or they will face a fine of $95, or 1% of their annual income.

More Optimism Last Quarter?

Vishnu Lekraj, insurance analyst at Morningstar, says the insurance industry was more optimistic during the fourth quarter of 2013 than they are now about the getting young and presumably health enrollees.

“It hasn’t happened as of yet,” Lekraj says. “It’s still a ‘wait-and-see,’ given the [open enrollment] deadline ends on March 31. But it’s not out of the realm of possibility that the pool may skew a bit older, a bit sicker, and not as healthy, given those are the folks who need and want insurance right away.”

Clare Krusing, deputy press secretary for America’s Health Insurance Plans, which represent about 90% of the insurers in the industry, says the industry is in a holding pattern.

“It’s important to look at enrollment over the entire six-month period of open enrollment in order to understand the impact these numbers will have on the marketplace” Krusing says. “It’s the broader spectrum of who enrolls over that time—their ages and health status.”

Will Prices Jump?

The greater concern within the industry is that the current premium prices are too low, Lekraj says. HHS reported that the monthly premium for the average American, pre-subsidy, would be about $328 per month for a mid-tier plan.

“[Insurers] may lose money on the policies you have underwritten, or overall within the exchange,” he says. “Right now, what I am hearing is profitability per product is around -5% to +3%, a lot more downside in terms of profitability within exchanges.”

AHIP does acknowledge costs may go up if projected goals aren’t reached, Krusing says.

“If younger people don’t decide to enroll, leaving the pool saturated with older, less healthy people the costs could increase across the board,” she says.

Tom Harte, president of the National Association of Health Underwriters, also fears premiums will skyrocket in 2015 if young adults, who skew healthier, don’t enroll.

“I am deeply concerned,” he says. “All of the premiums that were calculated and delivered to customers with an effective date of Jan. 1 were predicated on the fact that young people would enroll in coverage.”

He adds that the lack of apparent interest from younger people to enroll shows there are issues with the individual mandate.

“I am concerned about what the future holds for health-care reform because of the lack of enrollment of young people,” he says. “It’s a testament to the fact that the individual mandate fine is not working. To have someone pay 1% of their annual income, or $95 as a penalty, is not substantial enough.”