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Are Obamacare’s marketplaces working? Here are 4 ways to tell.

Deadline Approaches To Signup For Health Insurance Under Affordable Care Act Photo by Joe Raedle/Getty Images

Obamacare’s fourth open enrollment season begins today, at an especially tumultuous time for the law.

Premiums on the marketplace are rising, on average, 22 percent. This has raised questions of whether healthy people will continue to enroll, or whether those who don’t receive subsidies might decide to quit the marketplace.

In prior years, premiums have risen at a much slower pace. They grew by about 2.5 percent in 2015 and 7.5 percent in 2016. So this open enrollment period will be a crucial test for Obamacare’s future, to see whether the marketplaces can be a long-term, sustainable infrastructure to provide health coverage for low- and middle-income Americans. How well — or poorly — the 2017 sign-ups go will undoubtedly shape what the next president will want to change about Obamacare, too.

How will we know how Obamacare is doing on this test? There are arguably four key questions to watch during the 2017 open enrollment season.

1) Does enrollment hold steady — or rise?

The Obama administration currently expects an additional 1 million people will sign up on the marketplaces this year, raising average monthly enrollment from 10.5 million to 11.4 million.

Larger insurance marketplaces are generally more stable, with more healthy enrollees who can offset the costs of sicker shoppers. And enrollment has, so far, increased each year — although not nearly as fast as government forecasters had expected. If the market shrinks, that would be a worrisome sign, suggesting that the large premium hikes have driven some out of coverage.

Experts say the administration’s projections will be challenging to achieve — but aren’t impossible. They say the administration has learned a lot about outreach over the past four years, and that the rising individual mandate fine for not purchasing coverage may also push more people to purchase coverage.

“It feels ambitious but achievable,” says Larry Levitt, senior vice president for special projects at the Kaiser Family Foundation. “They’ve gotten better at running the program and may have figured out ways to better target outreach efforts.”

2) Do people without subsidies keep buying coverage?

The vast majority of people who buy coverage through the Obamacare marketplaces — 83 percent — receive financial help that caps their premium at a certain percentage of their income. These people are generally insulated from the big rate hikes you read headlines about.

But that still leaves 17 percent of the Obamacare marketplaces unsubsidized, and these enrollees bear the full brunt of the premium increases. This year will test whether the Obamacare marketplace remains an affordable and attractive option to those who earn too much to qualify for financial help. The cutoff is 400 percent of the poverty line — about $44,000 for an individual or $90,000 for a family of four.

This includes people like Jennifer Kelly, who lives in New Hampshire with her husband, Bill. The couple’s premium will rise from $835 to $1,035 per month this year. They usually earn about $70,000 per year from Jennifer’s work as a freelance financial writer, meaning that their new premium would eat up 17 percent of their income.

Kelly and her husband are both relatively healthy; Kelly goes to the doctor about twice a year. Still, she does plan to buy coverage next year, largely because it’s the law — and she and her husband support Obamacare. Still, that means shouldering a significant financial burden, and likely dipping into her savings to cover the rising costs.

“I’m really glad poor people have access to Medicaid, but it seems like us in the middle class were hung out to dry on this,” she says.

There are millions of people who will make decisions like these, and they’ll all be crucial to the future of the law — and how many people Obamacare can ultimately cover.

3) Do shoppers outside of the Obamacare marketplace shift onto the government websites?

Right now, there are millions of people buying their own coverage outside of Healthcare.gov and the state-based marketplaces. These might be people who go straight to an insurance broker, for example, or buy coverage directly from a health plan’s website. They don’t receive subsidies, which are only available to people who buy through a government website.

The Obama administration recently estimated that there are 6.9 million people in this situation — and 2.5 million of them would be eligible for subsidies if they switched to the marketplace.

The people who buy coverage outside the marketplace will face the full cost of this year’s steep rate hikes. At a recent press briefing, an administration official projected that the spiking premiums might push these people to reconsider the marketplace, where they can get subsidies. And that would increase Obamacare enrollment.

4) What happens in Arizona?

Arizona has arguably had the most challenging Obamacare experience this year. Monthly premiums for a midlevel plan there will more than double, from $196 in 2016 to $422 in 2017. Most of the state is served by just one health insurance plan — and for a while, there was an Arizona county that was the only one in the country where not a single insurance plan wanted to sell.

Obamacare is a different program in every state. There are some places, like California and Florida, where the law is working exactly as planned. Multiple plans are competing to provide benefits at affordable prices. These tend to be more populous states that offer insurers lots of customers and lots of hospitals and doctors that they contract with to build networks. Lots of insurers want to sell coverage, and that competition seems to lead to lower premium growth.

But then there are places like Arizona, where the health care law isn’t delivering on the twin promises of competition and affordability, and there, premiums are rising 116 percent before the subsidies kick in. The places where Obamacare premiums are rising fastest tend to have smaller and more rural populations. Oklahoma’s premiums, for example, will rise 69 percent, and Alabama’s go up 58 percent.

These places struggled to attract many insurers to their smaller markets before the Affordable Care Act launched. Now they’re testing a central tenet of the Affordable Care Act: whether a new, better-organized marketplace would make these places more alluring to health insurers — and ultimately drive down premiums through competition. In 2017, the answer still seems to be no.

“A year of reckoning” for Obamacare

In a way, Obamacare had training wheels on for the first three years. The law included multiple policies meant to make the launch of a new insurance marketplace go smoother. These policies did things like reimburse health plans that had especially expensive patients with really high costs. Insurance plans, meanwhile, sold their policies for much cheaper prices than forecasters had expected.

Now prices have risen up to where forecasters had expected them to be — and some of those transitional policies are ending. And we’re seeing a test of how the marketplaces work when the training wheels come off.

“This is a year of reckoning,” says Caroline Pearson, senior vice president at the research firm Avalere Health. “Insurers needed to raise their rates, and some exited the market because they were continuing to sustain losses.”

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