As early enrollment numbers roll in for the Patient Protection and Affordable Care Act health insurance exchanges, one demographic in particular has received a lot of attention: the "young invincibles."
Getting enough young, healthy people to sign up for coverage to offset the higher claims costs of older, sicker enrollees has become a focal point for policymakers and the healthcare industry as essential to the PPACA's success.
Late last year, President Obama decided to let health insurers continue offering plans that don't meet the reform law's requirements through the end of 2014. HHS and Moody's Investors Service have predicted the extension of these health plans could lead younger people in good health to stay away from the exchanges. As a result, the total amount of premiums health insurers collect for exchange plans could be less than the total healthcare expenses of exchange enrollees.
Subsequently, insurance companies could increase premiums to compensate, creating a "death spiral" of young people continuing to shun the exchanges and insurers raising premiums, ultimately undermining the PPACA's purpose of offering affordable coverage to everyone and shrinking the uninsured population.
In January alone, just 27 percent of those who signed up for exchange plans were between the ages of 18 and 34, compared with 24 percent for those who signed up through Dec. 28, according to HHS.
However, according to a report from The Commonwealth Fund, young adult participation in the exchanges isn't the most important factor when it comes to the success of the exchanges, and, in fact, there is no "right" rate of young adult participation.
The Fund gathered federal officials, health insurance actuaries, researchers and health plan representatives for a meeting to discuss the issue of young adult enrollment in the PPACA exchanges. While those who participated in the meeting agreed that young adult participation is important for marketplace stability, it is one of many factors that affect exchange premiums.
In fact, health actuaries view health status, which determines likely use of healthcare services, as the most important factor influencing pricing decisions for all age groups. The young enrollment rate isn't as significant as health status because insurers are still allowed to charge older adults as much as three times what they charge younger adults, according to the report.
"What really matters is the health distribution within an age category," says Sara Collins, PhD, the report's author and vice president of the Fund's Health Care Coverage and Access program. "If you were a health plan and you had an older age demographic, if they're healthy, then you'd even do somewhat better than you'd do than if they were healthy young adults, because you're allowed to charge them more."
The report also cites an analysis published earlier this year by the Kaiser Family Foundation, which found that even if young adults aged 18 to 34 end up representing only 25 percent of enrollees, insurers could still be expected to earn profits, and the resulting 1 to 2 percent increase in premiums in 2015 would be well below "death spiral" levels.
Furthermore, the PPACA includes several provisions meant to stabilize the insurance market and prevent losses for health insurers. These include the risk adjustment program, which redistributes funds from health plans with lower-risk enrollees to those with higher-risk enrollees. Additionally, the reinsurance fund, which runs through 2016, ensures health plans that enroll higher-cost individuals get payments to offset their expenses. Finally, the risk corridor program, also in effect through 2016, limits health plans' losses and gains beyond a specified range to stabilize premiums and prevent inaccurate premium setting during the early years of the PPACA exchanges.
Although there isn't much information publicly available at this point about the health status of PPACA enrollees, Dr. Collins says health insurers have prepared for "a large degree of volatility."
"What you sense is that carriers did view this as a transition period where there would be uncertainty," she says. "There's not going to be a death spiral."
More Articles on PPACA Enrollment:
The Long Road to Universal Coverage: Observations on Early PPACA Enrollment Numbers
5 Key Statistics on PPACA Exchange Enrollment in January
White House Dismisses Concerns About Lack of Young, Healthy PPACA Enrollees