As the individual mandate deadline looms, MNsure—Minnesota’s Obamacare exchange—is falling far short of insurance coverage goals

Here’s the headline from yesterday’s MNsure press release: “mnsure reaches milestone, exceeds enrollment goal.”  Scott Leitz, the interim CEO for MNsure, is “thrilled that more than 136,000 Minnesotans have enrolled in quality, affordable coverage through MNsure.”

Once again MNsure is—to use a football metaphor—hiding the ball.  You see, there are private insurance coverage goals and there are public program coverage goals.  MNsure lumped the two goals together and, in so doing, hid the fact that they are nowhere near meeting their insurance coverage goals.

MNsure unlikely to meet private coverage goals

Back in October, the MNsure board of directors established a goal to enroll 78,829 Minnesotans in private health insurance coverage by March 31, 2014—the last day to enroll in coverage to satisfy Obamacare’s individual mandate.  Their goal for public program coverage was 56,324.

Based on numbers released for today’s MNsure board meeting, MNsure has so far enrolled 40,795 in private insurance coverage.  That’s only 52 percent of their private coverage enrollment goal.  With just days to go before the deadline, MNsure may receive a last minute enrollment surge but unlikely enough to meet its goal.  Public coverage enrollment—104,216—topped their October goal by 85 percent, which conveniently hides the private coverage shortfall when the two are lumped together. 

It’s critical, however, to view the private insurance coverage goal separately.  The only way Obamacare’s new insurance regulations work is if enough healthy people enroll in private insurance coverage to create a balanced insurance risk pool.  Furthermore, MNsure’s current funding mechanism depends on private insurance coverage enrollment. 

Stable, affordable premiums depend on enrolling enough healthy people in private coverage

A balanced risk pool is essential to maintaining stable and affordable health insurance premiums.  Obamacare’s new insurance regulations put Minnesota’s current balance at risk.   The regulations require insurers to accept all applicants during an open enrollment period.  If a disproportionate number of sick people enroll, then the insurance pool will become too expensive.  This makes it especially important to enroll healthy people on the front end.  Without them, rates will adjust upward next year and these higher rates will make it harder to enroll the healthy going forward. At some point, premium rates may simply be too high for healthy people to enroll and, eventually, too high for anyone to enroll.  This is the much feared premium “death spiral.”

Unfortunately, as of March 23, young adults aged 19 to 34—the healthiest age cohort—made up only 21 percent of enrollment for individual market coverage.   That’s far short of the Obama administration’s goal for young adults to make up 38 percent of enrollment.  Estimates vary on what this means to insurance rates, but analysts seem to agree low young adult enrollment alone won’t lead to a premium death spiral.  One estimate finds only a 2.4 percent rate increase if young adults represent 25 percent of enrollees.  Another finds lower young adult enrollment “could result in additional losses of about 10 percent by insurers.”    

A maybe more worrisome age issue, the missing young adults in the MNsure age distribution appear to be largely replaced by older adults aged 55 to 64, who are, of course, on average sicker.  The table below compares the distribution of potential individual market enrollees with actual MNsure enrollees.  (Potential enrollees are based on Kaiser Family Foundation estimates of the national insurance market.)  Actual enrollment for older adults is nearly twice as high as their potential enrollment.  Thus, it appears the distribution is both light on the healthier bottom of the age distribution and heavy on the sicker top.  The combination could have a more substantial impact on future insurance rates.

Comparing Potential Individual Market Enrollment with Actual Enrollment in MNsure

AgeDistribution of Potential Individual Market Enrollees by AgeAgeMNsure Actual Individual Market Enrollee Demographics, March 23, 2014
Under 186%Under 1911%
55 or older17%55 or older35%
Source: Larry Levitt, Gary Claxton and Anothony Damico, “The Numbers Behind ‘Young Invincibles’ and the Affordable Care Act,” Kaiser Family Foundation, December 17, 2013; and MNsure Metrics Dashboard, March 26, 2014.

Ultimately, the overall health status of the insurance pool across all ages is all that matters.  It remains to be seen whether the health status of the pool will lead to substantially higher rates, but the demographics and the overall lower-than-expected enrollment is certainly not a positive sign.  Healthier people who don’t expect to need insurance are more likely the people opting out.

Lower private coverage enrollment creates budget shortfall

As noted above, private insurance coverage enrollment is also important to sustain MNsure financially.  Remember, MNsure is Minnesota’s Obamacare exchange and federal funding for MNsure runs out at the end of the year.  Too few enrollees could make MNsure too expensive on a per enrollee basis.  A portion of MNsure funding comes from Medicaid to fund the public program enrollment side, but only so much funding can come from Medicaid.  MNsure’s budget for 2015 depends on carrying over $5 million in federal grants to cover a projected shortfall due to low enrollment.

More than expected using MNsure to enroll in public programs

The only thing the current public program enrollment numbers prove is that MNsure is doing a better than expected job at converting people to enroll in MinnesotaCare and Medical Assistance through MNsure versus the traditional enrollment process.  There do appear to be a number of new enrollees in public health care programs.  Compared to a year ago, there are 72,158 more people enrolled in public managed care health plans.  MNsure likely played some role in boosting enrollment, but it’s not clear how many enrolled through MNsure who would not have enrolled otherwise. 

There are both good and bad dimensions to higher public program enrollment.  Though it’s good more low-income folks gain health coverage, ideally more low-income Minnesotans would be covered through private insurance coverage where they can maintain continuous coverage as their income fluctuates.  And it remains to be seen what higher enrollment means to the state’s budget. 

The fact that we’re blowing away expectations on the public program side of MNsure and failing to meet expectations on the private coverage side should give people pause.

In January, the Minnesota legislative auditor launched a wide-ranging audit of MNsure due, in part, to a troubling lack of transparency and accountability.  MNsure’s celebratory press release—reveling in meeting overall enrollment goals without acknowledging shortfalls in private coverage enrollment—reveals MNsure’s staff continues to struggle with straight answers.  Moreover, it adds further evidence to why it was a mistake to task a new state agency with delivering services already available in the private market.