Here’s one reason Obamacare’s marketplaces are struggling: They’re less than half as large as we thought they would be.
Back in 2014, the Congressional Budget Office estimated that 22 million people would be enrolled in the marketplaces by 2016. In reality, the marketplaces have attracted 10.4 million people.
Obamacare’s lower-than-expected enrollment drives a lot of the problems we’re seeing right now. It helps explain why many insurers have left the marketplace: The small number of customers makes it a less appealing place to invest resources.
The small insurance market also helps explain why premiums are spiking. It indicates that only the people who really need coverage are signing up and that healthier enrollees are skipping out.
“We’ve got all of the sickest people, who are highest need, and they enrolled in 2014,” says Caroline Pearson, a senior vice president at the research firm Avalere Health. “Each year, the marketplaces have continued to not pick up enough healthy people to create a stable risk pool.”
What’s more, Obamacare drafters structured other important programs around the projected size of the marketplace. This includes the risk insurance program, which transfers money to insurance plans that end up with exceptionally sick enrollees.
The risk insurance program ends this year because the drafters of Obamacare assumed that, at this point, the marketplace would have stabilized at more than 20 million enrollees. The problem is that the marketplaces are not close to that size. They still have many of the growing pains of a smaller insurance pool that legislators didn’t expect would be happening four years into the health care law.