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You are here: Home / Anderson On Health Insurance / Getting longer and the dangers of bigger

Getting longer and the dangers of bigger

by | 28 Comments

This post is in: 

First the very important news:

I was surprised. I thought the 15th would have been a hard deadline but enrollment is coming in fast. Charles Gaba has an optimistic projection of a million enrollments yesterday and a realistic projection somewhere between 800,000 and 900,000:

The more I think about it, it’s even conceivable that national ACA enrollments could even break 1 Million in a single day today.

Again: HealthCare.Gov’s all-time one day record was 600,000 QHP selections, set 1 year ago today. HC.gov covered 38 states last year, enrolling around 76% of all ACA exchange enrollees. That means the national tally for 12/15/14 was likely around 800,000 people.

This year, HC.gov has added a state (Kentucky), bumping their proportion up to around 77%. That means if they manage to reach roughly 770,000 people (which would shatter last year’s record by 28%), that would almost certainly mean hitting the 1 million threshold nationally. Again, this is unlikely; somewhere in the 800K – 900K is much more likely, but it’s a nice thought…

A friend of mine who was scheduled to be off today was told yesterday afternoon to come in as the surge had not stopped. So let’s not ruin her ruined weekend. Sign-up if you can.

I was also talking with a colleague who works for another insurer ( one of the few surviving co-ops) in another state. His company is on Exchange and they have a problem. They’re selling too many policies.

He thinks that his company has the right pricing to actually make money on their covered lives. That was before they started to get twice their projected enrollment. Given their local competition structure, the marginal member that they attract is most likely a fairly healthy member so they are not worried about claims expenses running high. Instead they are worried that the state regulators will get worried. Their capital cushion was adequate at the projected enrollment level. It was getting a little tight when enrollment ran 25% over projections and now it looks like me trying to fit into a pair of jeans I last wore my junior year of high school. Under the best case scenario, those jeans will fit and I can zipper the fly but I better not have anything salty nor be in any warm room while wearing them. The capital cushion which was adequate for projections and okay for an optimistic scenario is under severe threat because of a super optimistic scenario has turned into a pessimistic scenario. That scenario was playing out last night.

If there is still significant demand for new policies, the state regulators for my colleague’s company will be camping out in their finance department for the next year. Small insurers with sudden enrollment spikes are very vulnerable to running into risk based capital constraints which could lead to liquidation of the insurer even as the insurer is making money on current operations.

Size matters and getting too big too quickly can be as much of a problem as not getting big enough fast enough.

Reader Interactions

28Comments

  3. 3.

    MomSense

    Keep signing up everyone! Yesterday One of my friends helped her ex husband sign up. Now that’s love – for Obamacare. Actually I think she just doesn’t want to get screwed again on child support but whatever it takes.

  4. 4.

    Kineslaw

    All of a sudden it looks like I will be moving back to Texas from Australia in mid-February. This is a qualifying event for signing up for Obamacare, however I wonder if I should sign up now to lock it in.

    The problem with signing up now is it requires lying and saying I reside in Texas. Not sure what to do.

  5. 5.

    Central Planning

    @Richard –

    Given their local competition structure, the marginal member that they attract is most likely a fairly healthy member so they are not worried about claims expenses running high. Instead they are worried that the state regulators will get worried.

    That seems to be a contradiction. If they are assuming they will attract fairly health members, why would state regulators be worried? That they are going to make too much money? Wouldn’t healthier members create a larger capital cushion over the course of the year? Are the regulators just being nervous in case it doesn’t work out that way?

  6. 6.

    dr. bloor

    Sane black guy gets elected, and there’s a run on guns. Crazy tangerine guy gets elected, and there’s a run on health insurance.

    What a country.

  9. 9.

    Elizabelle

    @dr. bloor: well said. Lol.

    I’m glad healthcare.gov is so responsive to American citizens. That will go away.

    Love the cat in a necktie ad that follows me around the internet. In the time it takes to watch a cat video, you can get covered. Clever. Makes me feel well cared for.

  11. 11.

    Richard Mayhew

    @Central Planning: By their mission and their nature, insurance regulators are very nervous people. They don’t care what your projections say you can afford at the end of the year. They care that if on January 2, can the company pay out all claims for a knife fight at the National Hemophiliacs Convention and then go out of business on the 3rd? If yes, they don’t worry, if no, they worry.

  15. 15.

    donnah

    Let me speak in very broad, general terms, because I don’t have all the numbers right here. My husband and I are in our late fifties with three grown sons no longer living with us at home. We both work part time jobs and because of my oldest son’s fight with leukemia twenty-five years ago, we lost not only our insurance, but my husband was forced to quit his job because my son’s insurance caused the small company to raise rates.

    So, we went without health insurance until the ACA became real and we signed up. My husband loathes the process you have to go through online, but he did it and we got coverage with our own doctor. Last year the rate jumped, he had to re-apply, and we hung on with a slightly higher rate.

    But then it changed and we had to drop out. We went without insurance again.

    So he went to apply again before the deadline and found that our plan was now over eight hundred dollars a month. We finally settled on another company and different coverage and we had to give up our doctor. It’s now at three hundred a month.

    Look, I’m glad we’ve had the opportunity for health care, but it’s been a burden and a pain in the rear to keep it going. There’s no stability in it. And now that trump’s people have their grubby mitts on it, I don’t know that we’ll be covered for much longer.

  18. 18.

    TaMara (HFG)

    Colorado Exchange is greatly improved. Was a breeze this year to navigate – even at the last minute. And since I am no longer house hunting, my premiums will not break me this year. Gonna miss those subsidies when they are blown-up along with the rest of the government. Sigh.

  20. 20.

    Barbara

    @donnah: I am sorry you have faced such burdens with your son. Probably when your son was ill CHIP was not yet an option. Hang in there.

  21. 21.

    Brachiator

    I was surprised. I thought the 15th would have been a hard deadline but enrollment is coming in fast. Charles Gaba has an optimistic projection of a million enrollments yesterday and a realistic projection somewhere between 800,000 and 900,000:

    The more I think about it, it’s even conceivable that national ACA enrollments could even break 1 Million in a single day today.

    Whether it’s 800,000 or a million, it’s still a significant number.

    I hope the Democrats emphasize these enrollments hard and loud when the Republicans start talking Repeal.

  23. 23.

    ? Martin

    Getting too big too quickly is what killed CoOpportunity. Their target was 11,000 signups and they got over 100,000. The $150M in secured loans from HHS wasn’t enough to backstop that kind of enrollment and when they went back to HHS, the GOP had already killed funding expansion for the co-op pilots, and risk corridors weren’t in place. HHS simply didn’t have the cash to loan them. That wasn’t the only thing that went wrong – they underpriced the product as well, but they likely would have weathered that if they only had 11,000 policies.

  24. 24.

    bl

    Richard

    My unemployed adult son has insurance through ACA expanded Medicaid. I am wondering (now that the deadline is extended – for some reason I thought enrollment ended in early November and didnt pay attention) if you have an opinion if he should sign up for one of the non-Medicaid options. He doesnt qualify for a subsidy because he has no income to report so it wouldnt be cheap (he has a preexisting condition that requires regular doctor visits and monthly scripts.) When we looked at options last year, his choice was Medicaid that was essentially free or a plan that through the deductibles and premiums would cost a minimum of $6K. He picked Medicaid and it has worked well for him. I dont know if there is likely to be a better continuation option under Medicaid or one of the non-Medicaid exchange plans with Repub shenanigans. Fortunately we live in a blue state that is more progressive so I am hopeful they will try to do something.

    I realize this is all a guess, but wondering if you have some insight.

    Thanks for these posts – they are helpful.

  28. 28.

    Bob Hertz

    Thanks to Martin for his comments on the Co-opportunty failure.
    What idiots in Washington thought that one could start a heath insurance company selling qualified plans with a loan of just $150 million?
    That is a peanut amount of capital. It is like starting a car company using your Visa card.

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