The elimination of the individual mandate for health insurance under the Trump Administration is not the sole cause of Covered California’s lower 2019 new enrollment numbers.
Covered California released a report that blamed the drop in new enrollments largely on the federal government’s elimination of the individual mandate or Shared Responsibility Payment. This is not the full story and their report, Covered California 2019 Open Enrollment Early Observations and Analysis, fails to factor in other economic and market conditions.
There is no doubt that some individuals and families chose not to enroll in health insurance because the individual mandate has been eliminated on the federal level. But the 23.8% decrease in new enrollments is not entirely a direct result of the individual mandate elimination. If it was, we’d see a similar phenomenon with a decrease in renewals, which Covered California did not experience. They actually had an increase of 7.5% in renewals.
Elimination Of Individual Mandate Not Sole Cause Of Decline In Covered California
There are many reasons why new enrollments for individual and family plans through Covered California dropped from 388,344 new sign ups in 2018, down to 295,980 in 2019.
Record Low Unemployment
With lower unemployment in California, compared to 2014 when Covered California first opened for business, more people are enrolled in group health insurance. If a consumer has group health insurance, there is no need to turn to Covered California. More people with group health insurance will reduce the number of people who apply for Covered California coverage. Covered California did not report, and probably doesn’t have access to, the increase or decrease in the group health insurance market. But Covered California has said enrollments in their Covered California for Small Business plans have increased every year. Well, those new group enrollments are individuals and families who are no longer eligible for Covered California individual and family plans.
Medi-Cal
Not addressed in the Covered California report was the increase or decrease in Medi-Cal enrollments. It is unclear from new enrollment numbers if those new sign-ups include people who were deemed eligible for Medi-Cal or if the 295,980 new enrollments are only those who qualified a Covered California health plan. Anecdotally, I think I had just as many enrollments that were Medi-Cal eligible as were eligible for Covered California with the subsidy for 2019. The point being, is the 2019 new enrollment number capturing Medi-Cal eligible individuals and families. If not, that is a problem. People enrolling and deemed eligible for Medi-Cal, and not represented in the new enrollment numbers, are still applying for health insurance and have not been dissuaded from enrolling due to the elimination of the individual mandate.
Off Exchange Silver Enrollment
In 2018 Covered California artificially inflated the Silver plan rates to generate dollars to pay for the Enhance Silver cost-sharing reductions offered in the Silver 73, 87, and 94 plans. Covered California allowed the carriers to offer an off-exchange Silver 70 plan, that virtually mirrors the Covered California Silver 70 plan, but at a lower rate. Sometimes the rate differential was 10% to 15% below the on-exchange Covered California rate. Covered California actively encouraged consumers who were receiving little to no monthly Premium Tax Credit, and wanted a Silver 70 plan, to buy it off-exchange directly from the carrier. How many consumers never even shopped Covered California because they went direct to the carrier for their Silver 70 plan to save 15% per month? How much of the drop in new enrollments was based on consumers not even applying through Covered California? I took several new clients direct to off-exchange Silver plans and never even considered Covered California because of the rate differential.
Market Saturation
Covered California has done a great job of marketing affordable health insurance to our state’s residents. They are so good that I think the comparisons that Covered California uses to the Federally Facilitate Market in the report are not entirely appropriate comparisons. While there will necessarily be similar changes between California and other states in terms of new enrollments and persistency of enrollments, Covered California is its own unique market force. It is entirely possible that Covered California, like any business, is witnessing a normal flattening of sales as they tapped the available consumer pool for new sales.
One analogy is the slowing growth of smart phones and mobile devices. Virtually everyone who wants a smart phone or tablet has bought one. Similarly, a large segment of California residents who want affordable health insurance may have already enrolled leading to declining new enrollments. This is not a bad thing and it is not a function of the elimination of the individual mandate.
High Rates
Another similarity that Covered California has to the smart phone market are high prices. People are putting off getting a new cell phone because the new models cost so much more. This decreases new sales as people like me continue to use our older model smart phones. However, health insurance is not a smart phone that you can keep using. Health insurance rates have become so outrageous that many people just can’t afford it. People who are dropping health insurance, or not enrolling, are consumers who make over 400% of the federal poverty level and are not eligible for any Covered California premium assistance.
I am a 55-year-old person who makes $55,000 per year. I am not eligible for any Covered California subsidy. The least expensive Bronze plan is $616.24 from Kaiser, which covers virtually nothing until I hit the maximum out-of-pocket amount of $7,550. The least expensive Silver plan, that has copayments for most routine health care services and prescription drug coverage, is $827.01 per month from Blue Shield. I can’t afford to spend 18% of my monthly income on health insurance.
The cost of the individual mandate is nothing compared to the cost of a decent health insurance plan. People are not enrolling in health insurance because it is too damn expensive. I don’t know what percentage of the decline in new enrollments for Covered California is due to expensive health insurance and they don’t know either. Talk to any health insurance agent they will tell you they fielded many calls from consumers wanting a lower rate on health insurance. They were willing to take anything, even if crappiest of plans if they could just afford it. I don’t sell them, but I had to inform people of the health care sharing ministries. These health care sharing plans are not insurance, but they can seem like a health plan for half the cost of a Covered California plan. How many people enrolled in these health care sharing plans and by-passed Covered California and the off-exchange plans altogether?
Covered California Has No Clear Picture Of Market
Covered California did note in their report that unsubsidized enrollment decreased.
There was, however, a substantial difference in the number of unsubsidized consumers who signed up during open enrollment, with plan selections dropping 31 percent, compared to 21.9 percent of those subsidized (see Appendix Table D: Covered California New Plan Selection by Income, 2018-19).
A drop in unsubsidized enrollments is not indicative of people foregoing insurance either because of the elimination of the individual mandate or high rates. Even Covered California recognizes this fact.
While this differential drop in enrollment is large, it is possible that some of the decline in unsubsidized consumers is not based on their foregoing coverage, in that they could be moving off-exchange and buying coverage directly from a carrier. This issue is complicated by the changes instituted after the cancellation of direct federal funding of the required cost-sharing reduction reimbursements, leaving California and many states with different premiums for unsubsidized consumers who purchase the same coverage on- versus off-exchange.
Covered California is acknowledging that there is a lack of data to make a determination as to the consumer’s intent with respect to their lower enrollment figures.
Off-Exchange Enrollment
While Covered California is within their rights to draw conclusions about the lower 2019 enrollments being tied to the removal of the individual mandate, they also recognize they don’t have all the data. The big missing piece is if the off-exchange enrollments increased or decreased. Did the off-exchange plan enrollments, directly from the carriers, experience the same decline or was there an increase. A similar decline would partially validate Covered California’s conclusion that the elimination of the individual mandate is dampening health insurance enrollments. However, if off-exchange enrollments increased (and don’t forget enrollments in health care sharing ministries), it’s possible that Covered California’s decline was just a market shift away from Covered California and not necessarily intrinsically tied to the individual mandate.
Covered California even states they don’t have all the data to make a comprehensive evaluation of the market place.
California’s individual market covers more than 2 million people, and just as with those who enroll in Covered California and sign up “off-exchange” by enrolling directly with a health plan issuer, comprises existing consumers who renew their coverage for the coming year and new consumers who sign up during open enrollment. At this time, we do not have a clear picture of current enrollment in the off-exchange market in California or the rest of the nation.
They don’t have a clear picture of the market, but they are quick to draw conclusions. It is possible that Covered California’s assessment of the lower enrollments is in large measure directly related to the elimination of the individual mandate. But Covered California may be over reacting as well. The 24% decline in new enrollments was far higher than their high-end projections for the worst-case scenario.
Well, maybe their projections were wrong. Perhaps there are other economic forces that drove consumers not to enroll in Covered California such availability of group health insurance, individuals opting for lower price off-exchange health plans, or people going without health insurance because it is just too expensive. Either way, I think Covered California has been too quick to blame the elimination of the individual mandate for their lower enrollment figures.
I also don’t think that instituting a California individual mandate will drive consumers into health insurance. You can’t punish people into buying a product they can’t afford. The key ingredient to getting more people to purchase health insurance is to make it affordable. You either need to increase the subsidies for higher income earners OR develop plans with lower rates. No one wants to go without health insurance. But neither can middle income households afford to spend 18% of their disposable income on health insurance.
Download and read the full report: Covered California 2019 Open Enrollment Early Observations and Analysis