According to a new study put out by the Mercatus Center, the Affordable Care Act has failed to meet widespread expectations. Enrollment is far below initial projections, and the enrollees are much less healthy than predicted.
When the Affordable Care Act (ACA) was being debated back in 2010, the Congressional Budget Office (CBO) projected how many people would enroll in ACA exchange health care plans. Now, as we enter Obamacare’s third open enrollment period, actual enrollment numbers are far short of those projections. Enrollment, as estimated by Mercatus, was 2.5 million below projections in 2014 and 3.5 million below projections in 2015.
The report notes that the CBO’s initial projections were actually conservative at the time, with the Centers for Medicare and Medicaid Services (CMMS) and the RAND Corporation estimating twice as many enrollees for 2014. CMMS projected 16.9 million enrollees. Actual enrollment was only 5.5 million, according to Mercatus, less than a third of CMMS’ projections.
The Mercatus report notes that one contributing factor to the low enrollment numbers is that the individual mandate, a key provision of Obamacare, has proven to be largely ineffective so far. According to one report, families making over 200% of the poverty line are actually better off absorbing the mandate’s fees and not signing up for ACA insurance. Additionally, the ACA allows for a number of exemptions from the individual mandate, which further weakens the effectiveness of the mandate.
Enrollment is not the only area where CBO estimates have fallen short according to Mercatus. The CBO also overestimated Obamacare’s effect on insurers:
“In February 2014, CBO estimated that risk corridor payments would yield net savings to the federal government of $8 billion between 2015 and 2017. By projecting such large net savings, CBO expected that insurers would make positive overall profits on exchange plans.”
In other words, the CBO projected that premiums on ACA plans would be much greater than the payouts made by insurers. However, enrollees were much sicker than expected. This means that enrollees, as a whole, are making health care claims much greater than the premiums they paid. Overall, insurers actually lost money on ACA plans.
According to the study’s author, Obamacare will continue to underperform in 2016. The author notes that in order for Obamacare to succeed, healthier people, generally those making 200 percent of the poverty line, need to enroll. Without access to large subsidies, however, the economic incentives for middle class individuals to enroll remain low. Furthermore, insurers will have to raise premiums and deductibles to account for the sicker-than-expected risk pool, making ACA plans even less attractive to healthier, middle class individuals.