The Obamacare Sign-Up Scam

The administration is over-counting Obamacare insurance sign-ups-and is still unlikely to meet its own enrollment targets.



On September 30, the day before the launch of Obamacare's health insurance exchanges, NBC News asked Health and Human Services Secretary Kathleen Sebelius what success would look like for the law and its system of government-run insurance portals. "Well, I think success looks like at least seven million people having signed up by the end of March 2014," she said in response.

In the months before the exchanges went (sort of) live, this was a standard answer from the administration. It was based on the Congressional Budget Office's projection of how many people would sign up for private coverage through the law in 2014, and as Politico notes, the administration repeatedly pointed to the figure as an achievable enrollment target for the first year.

But with the release of another round of official Obamacare sign-up data yesterday, it looks rather unlikely that the administration's stated goal will be met. In response, the administration has revised its definition of success in hopes of papering over the law's ongoing failures. 

By the end of November, just 364,682 people had selected a private health plan from one of the exchanges. The majority of those—227,478, according to the administration's report—originate in states running their own exchanges. Just 137,204 selected plans in the federal exchange system covering 36 states.

That's a real improvement over the first month, in which the administration reported just 27,000 sign ups in the federal exchange. But it's still far short of where the administration hoped to be by this point. Indeed, it's not even where the administration expected to be by the end of the first month. A memo put out by the Centers for Medicare and Medicaid in September projected 500,000 private enrollments in October, 706,000 in November, and another 2.1 million enrollments in December—totaling some 3.2 million enrollments when coverage begins next year.

In fact, the numbers may well be even lower than the administration's figures suggest. That's because the administration isn't counting enrollments. It's counting "sign ups"—people who have done the equivalent of dropping a health plan into their online shopping cart.

But people aren't actually enrolled in plans until they have both received and paid their first month's bill. That may prove difficult, given that the system has had serious trouble sending enrollment data to insurers, sometimes sending bad data, and sometimes sending no data at all. According to the administration's own figures, about 25 percent of early enrollments in the federal exchange were subject to errors. A report in The Washington Post said the problem affected a third of early sign ups. Earlier this month, the administration said the errors are now in the range of 10 percent, which, given the increasing pace of enrollment, still means that tens of thousands of applications are likely to be flawed or missing. State exchanges are also reportedly having trouble sending correct applicant information to insurers, although it's not clear how widespread the problem is.

Even if there are no data transmission bugs, however, an enrollment still isn't complete until the first month's premium has been paid. This is not a minor concern. As Jon Kingsdale, who ran the Massachusetts health exchange and served as a consultant on Obamacare, wrote in The Washington Post last month, the most difficult administrative task for the Bay State's exchange was tracking and collecting premiums. Under Obamacare, Kingsdale wrote, "premium billing and tracking will be even tougher" than it was in Massachusetts—in part because enrollees will in many cases only be paying part of the bill. The federal government will be paying the rest to insurers through the law's subsidy system. But guess what? The part of the exchange system that is supposed to pay subsidies to insurers hasn't been built yet. (The administration is instead relying on a workaround in which insurers estimate the payments they are owed.)

Nor are people who have signed up rushing to send in payments, according to early reports. Insurance industry consultants told ProPublica's Charles Ornstein this week that so far, health plans have only collected payments from five to 15 percent of enrollees. That figure will surely rise as the deadlines (which vary between states) for payment approach. But in combination with Kingsdale's warnings about the headaches associated with bill collection, it suggests that enrollment is likely to be hampered by lack of payment.

So here's where we're at: 364,682 people had signed up for private plans by November 30, which is about 842,000 short of the administration's end-of-November projection. Information about tens of thousands of those 364,682 sign-ups has either been transmitted inaccurately or not at all to insurers. And so far only a small fraction of the sign-ups which have been correctly transferred to insurers have actually completed the process and paid. (The administration also says that another 803,077 people have enrolled in Medicaid.)

All of which means that we don't know how many people have actually enrolled yet. But the true number is virtually certain to be significantly lower than the administration's sign-up data suggests, and woefully short of the administration's stated goal. Is there any real chance that the exchanges enroll 7 million people in private coverage by the end of March? Probably not.

And that is presumably why the administration is now downplaying the 7 million goal. Instead they are saying that what really matters is not the topline enrollment figure, but the demographic mix of the various plans and risk pools created by the exchanges—how many young and health people are paying into the system relative to the older, sicker population that the young healthies are intended to balance out. 

"CBO provided the best proof point that this is a three-year ramp up when they estimated 7 million in the first year," said White House adviser David Simas, according to Politico. "The CBO first-year estimate, however, did not speak to the viability of the markets. What will is the mix of healthy to unhealthy on a market by market, insurer by insurer basis."

Fair enough; it's possible to imagine sustainable insurance pools that are smaller than originally projected. But if that's how the administration is now defining success, then why isn't the administration providing any data on the demographic breakdown of current enrollments? Some early reports from state exchanges suggest that enrollments so far are skewing toward the old. Given the administration's history of leaking better numbers and holding back data that's less likely to help, the fact that no demographic breakdowns for the federal exchange have been released so far suggests that whatever information they have isn't particularly encouraging.

Indeed, the net result of the health law so far may be that more people have lost coverage than gained it. As a Wall Street Journal editorial notes, "A charitable reading suggests that ObamaCare's net enrollment stands at about negative four million." Even assuming that all 364,000 private insurance enrollments actually take, and then adding in another 803,000 Medicaid enrollments, that's still not nearly enough to offset the estimated four to 5.5 million private plan cancellations so far under the law. The administration is clearly desperate to find some way to define Obamacare as a success. But the numbers just don't add up. Whatever success looks like, this isn't it.