Jan. 23—Despite optimistic assessments from the Obama administration and some insurers, new warnings indicate young, healthy enrollees needed to maintain the viability of health reform marketplace plans might stay away.

Moody’s Investors Service recently concluded recently that preliminary demographics for insurers offering plans in the health insurance marketplaces created by the Affordable Care Act (ACA) are a credit negative for those companies.

The U.S. Department of Health and Human Services (HHS) issued initial marketplace enrollment demographics in mid-January that found enrollment was skewed toward an older and presumably less healthy population. Only 24 percent of enrollees were in the critical 18- to 34-year-old age group, which was well short of the Obama administration’s 40 percent target.

“The way the exchange products are structured and priced, a sizable portion of these healthy individuals must enroll so their lower claim costs can subsidize the higher anticipated claim costs of less-healthy individuals,” a Moody’s report concluded.

Logical Choice?

Although the administration remains hopeful that more young people will enroll before the March 31 end of open enrollment and highlighted similar slow start to youth enrollments in the Massachusetts healthcare reform initiative, Moody’s was not convinced.

“The economics for healthy young individuals do not provide much incentive for them to sign up,” the Moody’s report stated.

That also was the conclusion of a new assessment released this week by the American Action Forum (AAF), a group critical of the healthcare overhaul. The cost-benefit analysis of ACA subsidies and cost sharing found six out of seven uninsured, young-adult households will be better off foregoing the government’s marketplace health coverage and covering their own healthcare costs out of pocket. Although tax penalties for lacking qualifying coverage increase each year, the study found it would remain “financially advantageous” for a majority of young adults to forgo coverage through 2019.

“The law makes health insurance more expensive for many young adults, while at the same time making the decision to go without health coverage exponentially less risky than it previously was,” the AAF assessment stated.

Another challenge for the drive to enroll young adults—functionally a stand-in for the high rate of healthy people whose enrollment is needed to ensure the viability of the plans’ risk pools—was the many technological failings of the state and federal enrollment websites. Widespread problems created enrollment obstacles that only the most persistent applicants waded through, which could imply that many of even the youngest enrollees are also likely most in need of insurance because they are already ill, according to the report.

“If this is the case, this group would not provide the financial support insurers need to cover the higher medical costs of the older enrollees,” the Moody’s report concluded.

Future problems also could include large percentages of young adults canceling their policies after a few months in the face of ongoing monthly premiums and a lack of needed medical care.

Publication Date: Wednesday, January 22, 2014