Update: Four things which help explain the underwhelming enrollment increase this year

As noted yesterday, after seeing the writing on the wall for several weeks now and lowering my final 2016 Open Enrollment Period projection by around a million already (from 14.7 million down to a range of 13.6 - 14.0 million), I've gone ahead and lowered it once again to a range of 12.4 - 12.9 million. It's still possible that the final weekend will see a shocking vertical spike, of course, but it would have to shoot up something like 10-12x last week's daily average in order to hit the 14 million range (as opposed to last year's 3-4x increase in the final week.).

So...what went wrong? Well, from the HHS Dept's POV, nothing...or at least nothing that they didn't already project last October. They had already openly stated that they didn't expect any dramatic exchange enrollment increases this year, giving a wide open enrollment range of 11.0 - 14.1 million QHP selections...which has a mid-range of 12.6 million.

The proper question here is how I managed to get it wrong, overestimating by what could be up to 2 million people, Obviously I can't be expected to nail every number, but that would be the least-accurate projection I've had to date.

I'll run a full post-mortem after the final numbers come in next week, of course (it may take even longer for a few of the state exchange numbers to roll in), but there are three four major factors I wanted to address right now (and no, none of these have anything to do with how affordable the policies are, whether the networks are too narrow or the deductibles too high, etc etc; those all contribute, of course, but are also a completely separate discussion):

• 1. As I've noted many times over the past few weeks, one major factor is a very simple one: The gross QHP selection total is actually at least 300,000 people higher than the official reports show.

There's no "fuzzy math" or "cooking the books" involved; in 2014 and 2015, the HHS Dept. didn't have the ability to separate out QHP selections which were cancelled due to non-payment (or other legal/technical reasons) until after the end of the open enrollment period. As a result, the actual enrollment number appeared to drop by a dramatic 13% from 11.7 million on 2/22/15 to 10.2 million on 3/31/15...over 1.5 million people in just 5 weeks.

The reality, of course, is that a major chunk of that 1.5 million had already been cancelled/purged by the insurance carriers weeks or even months earlier; it just took longer for the updated data to get processed into CMS's data reporting system. In fact, my guess is that over half of those policies were people who had been auto-renewed from the previous year but failed to pay their January premium, meaning they were never effectuated for even the first month...but it still took another 2 months for the numbers to catch up. This year, CMS has confirmed at least 300,000 people whose cancelled/never-effectuated policies have already been culled from the total. As I showed a couple of weeks ago, it's actually even higher than that; CMS has been "pre-purging" some invalid QHPs all along...but I don't know exactly how many; I'm guessing perhaps 100K more. This means a "cleaner" official number, but is also something I didn't know they were doing this year until a few weeks ago.

Since my 14.7 million projection assumed the same "include them all!" procedure as 2014 and 2015, those ~400K purged QHPs account for about 20% of the difference.

• 2. The second reason is something which I completely missed in my writeup about the Congressional Budget Office's latest budget outlook, but which Timothy Jost noted in his own more detailed CBO/ACA exchange writeup.

When I wrote up my original projection, I noted the 8 million projected enrollee "gap" between the CBO's 21 million March number and the HHS Dept's. 12.6 million mid-range projection. At the time, HHS stated that:

Specifically, we adjust CBO estimates downward based on employer surveys from Mercer and other industry sources, which suggest that shifts from ESI coverage and the off-Marketplace individual market into coverage through the Marketplaces will be smaller than CBO expected and that the remaining uninsured may be harder to reach than in previous years.

Commenter Larwit1512 and I have gone back and forth about the ESI shift issue, but the point is that I completely ignored the part I highlighted above: Shifts from off-exchange policies.

• (Update: As Andrew Sprung has pointed out, while both HHS and I did take the ESI factor into account when coming up with our original projections, I should still count it as a separate factor on this blog entry, so let's call it 4 total instead of 3).

As Jost notes, this is expressly addressed by the CBO's latest report:

The CBO had estimated in its March 2015 baseline report that 21 million individuals would be covered through the marketplaces by 2016. Enrollment has been much lower than projected, a fact noted frequently by ACA critics. The January 25, 2016 report clarifies that the 21 million number had included 15 million who would be covered through the marketplaces with premium tax credits and an additional 6 million who would purchase unsubsidized coverage through the marketplaces.

The CBO now projects that 13 million will be covered through the marketplaces for 2016, including 11 million with subsidized coverage and 2 million without. Half of the 8 million enrollee discrepancy between the March 2015 and January 2016 enrollment numbers is due to a reduced estimate in the number of individuals projected to enroll in the marketplaces without subsidies.

The CBO expects that most of these individuals will now purchase coverage directly with an insurer. The CBO also dialed back its projections for marketplace enrollment for 2015 from 11 million to 9.5 million, with the difference entirely due to a reduction in the projected number of unsubsidized enrollees.

In other words, the CBO's 21 million projection assumed that an additional 4 million people who were already enrolled in off-exchange policies would drop those and shift to new exchange-based policies (just as my wife and I did ourselves 2 years ago). Instead, the CBO is now saying that most of these folks will stay put...and why wouldn't they?

As I've noted many, many, many times before, dating all the way back to February 2014:

For months I've been trying to hunt down the ever-mysterious "Off-Exchange" private QHP enrollment data...people who have purchased new, ACA-compliant healthcare policies since October 1st, but have done so directly via the various insurance companies. These are, for the most part (at least in the states which haven't granted a 1-year extension of non-compliant policies) the same (or very similar) policies as those sold via the exchanges; the enrollment process simply bypasses the exchange websites, that's all. There are several reasons why people do this; the most obvious is if their taxable income is too high to qualify for an ACA subsidy. Why go through the hassle (on some exchange sites, not others) of jumping through the extra hoops of the Exchange process if you're certain that you aren't going to qualify for a tax credit anyway?

A fairly consistent 85% of exchange enrollees have received federal tax credits for the first 2 years, and this seems to still be the case this year. I'd be willing to bet that most of the other 15% are those who, like my wife and I, have variable incomes which hover around the 400% FPL mark, and therefore are never sure whether they'll qualify for APTC or not from year to year. In fact, only 9% of the enrollees appear to actually be over 400% FPL (a small percentage of those under 400% still don't qualify for APTC for various reasons).

Again, if your income is reliably above 400% FPL, what practical reason would there be to enroll via HC.gov or one of the state exchanges when you can get the same policy (or similar) directly through the insurance carrier?

Now, there are exceptions to this. Vermont and the District of Columbia require all individual policies be sold via their exchanges, and there are probably some cases where a carrier is offering better-value policies (even at full price) on exchange than off...but otherwise, I don't know why the CBO ever assumed that the percent of full-price enrollees would nearly double, from 15% to nearly 30%.

• 4. The third fourth factor is one which I've written about before, and which there seems to be no obvious solution to: In spite of a massive outreach/marketing/eduction effort by HHS, CMS, HC.gov, the state exchanges, the private insurance carriers, Enroll America, Families USA, Planned Parenthood, the United Way and dozens of other organizations, people are STILL utterly clueless about this weekend's deadline and/or the tax penalty for not enrolling.

Kaiser Health Tracking Poll: January 2016

Knowledge of Enrollment Deadline and Fine For Not Having Insurance

As the Affordable Care Act’s third open enrollment period comes to a close at the end of this month, most of the uninsured are disengaged from the ongoing enrollment process. Just 15 percent of the uninsured can correctly say when the deadline to enroll is. The majority (57 percent) of the uninsured say they don’t know the deadline and small shares incorrectly believe the deadline is some other time in 2016 (16 percent) or that it has already passed (12 percent). Additionally, only 1 percent correctly name the 2016 fine amount of $695 per person or 2.5% of household income.

I can understand being confused about the amount of the penalty, but to not know about the 1/31 deadline at all? That just boggles my mind. Obviously I'm super-aware of this to a degree that the average person isn't, but come on...the various organizations and agencies listed above have been plastering deadline notices all over the place. I realize that a large portion of the uninsured aren't likely to see Twitter feeds and banner ads, but 15% still seems jaw-droppingly low to me.

(sigh) Ah, well...15% is twice as many as the 7% who knew the deadline a month ago, so I guess that's an improvement...

Although they largely do not know the fine amount, nearly half (47 percent) of the uninsured anticipate that they will have to pay a fine for not having health insurance in 2015. An identical share (47 percent) say that they do not think they will have to pay a fine and the remaining 6 percent say they don’t know. Some uninsured may in fact be exempt from the fine because of hardship exemptions available under the law.

In terms of enrollment engagement and efforts to get coverage, most of the uninsured say they have not been contacted about signing up for coverage (67 percent) or that they have not tried to get more information on their own (57 percent). More specifically, most uninsured say they have not taken steps to figure out if they are eligible for the two main coverage expansions under the ACA — Medicaid and financial assistance to purchase health insurance through the healthcare marketplaces. Over 7 in 10 saying they have not tried to figure out if they qualify for Medicaid (72 percent) or for financial assistance to purchase health insurance (79 percent) in the past 6 months. On the other hand, about 3 in 10 (28 percent) uninsured say they have in fact tried to figure out if they qualify for Medicaid and 21 percent say they have tried to figure out if they qualify for financial assistance, but they remain without coverage.

Again, (sigh).

Anyway, there's still 4 days to go, and there's an all-out deadline/penalty marketing blast going on even as I type this; hopefully it'll push the awareness level up higher. You know, to 20% or so.

UPDATE: I should note that Lori Lodes of CMS pointed out during a coference call yesterday that the KFF survey includes all of the uninsured, not just those eligibile for exchange enrollment. Since only around 50% of the uninsured are realistically eligible to begin with, and since the demographics of the other half are mostly those who wouldn't have any reason to keep track of the deadline anyway, this suggests that the awareness level among those eligible to enroll is probably higher than 15%. That's still not great, but it's better than nothing.