• Wanted: 2.7M young people

    Sarah Kliff and Ezra Klein wrote,

    How many younger people are needed each year to hold down premiums depends on how many people sign up for the marketplaces. If the total this year is 7 million people, then about 2.7 million need to be in the 18-to-35 set.

    I’ve heard this need for 2.7M young enrollees before and wondered where the figure came from. As Kliff/Klein note, it seems like it is driven by some affordability threshold. That’s plausible enough. Younger people are, in general, cheaper to cover. The more that enroll in marketplace (formerly “exchange”) plans, the lower average premiums would be. I imagined somebody did a calculation that started with affordability and backed into 2.7M needed young people.

    But where is that calculation? None of the wonks I emailed this morning know. However, on a tip, Adrianna McIntyre did the following calculation and shared it with me by email.

    1. Suppose one wants to hit a target of 7M enrollees, which is what the CBO expects in 2014 (PDF).
    2. What proportion of 7M might be 18-35 years old? One estimate is it’s 19 million uninsured 18-35 year olds divided by 49 million total uninsured, or 0.39.
    3. Lo and behold, 7M x 0.39 = 2.7M.

    That is, one sense in which 2.7M young enrollees are “needed” is to hit CBO’s total of 7M in 2014. Of course, that 7M total are expected to enroll is, itself, related to affordability. How sensitive it is to the number of young enrollees is unclear. If only 2.5M young people enroll, how much more expensive will premiums be? How many fewer older people will enroll? How badly do we need every one of those 2.7M young people?



    • What I don’t get in the focus on young people is that the premiums the young pay are much, much lower than average, due to the 3:1 age band. I wonder if that might actually make it more important for the risk pool to sign up the relatively healthy eligible people who are, say, 40-65.

      I’m trying to help my aunt (very healthy, early 60’s, individual plan, probably not eligible for very much subsidy) find out whether the Exchange could be a good deal for her, and although we have to wait until October to really know, the results of reputable online calculators are rather shocking.

    • I took a look at the MEPS data and found that they estimated just over 40 million uninsured in 2010, with 17.8 million in the 18-35 year age group.

      So for 2014 Austin’s number would appear to be good…

      If you look at the per person expense data for this group you find…
      – 47.2% have some medical expenses – so OVER half of them have 0 healthcare costs in a year.

      The Median for those 47.2% with any expense is $305 – just over $25 a month…

      And the average is $1751 or just under $150 a month.

      But if one digs a bit deeper we find that about 2/3 rds of those 18-35 are self-described as Excellent or Very Good in health – and have even lower mean ($1389) and median ($291) with 43.2% of them having HC expenses.

      These are the “cash cows” that would make the marketplaces work – they would pay in several thousand dollars a year and require very little in terms of covered care.

      Of the remaining 5.7 million with less than very good health they average $2,334 in annual cost – have a median of $349 and 55.6% of them have health care costs.

      They will probably be the easiest group to sell but will not offer the same margins as their healthier counterparts.

      In summary I would be surprised if 7 million from this age range will enroll – the penalties are both toothless and too low in the first year to make that reasonable – but we shall see.

    • My bad – 7 million is the TOTAL first year – I would think 2.7 from this age group would be a bit of a stretch – but might happen if the stars align properly.

      BUT – I do think they will come from the “less healthy” in that age range.

    • Let me offer another way to look at the need for young people in the exchanges. I used to work for an insurance company, so get ready for an actuarial approach.

      I believe that everyone in the high risk pools will be placed into the exchanges. This is both the pools that existed in about 25 dates before 2011 and also the new pool that was recently closed.

      There are also persons who are unhealthy, are currently uninsured and did not have enough money to join the high risk pools. The new subsidies will draw them to the exchanges also.

      Assume for the moment that 500,000 high risk persons join the exchanges.

      Assume that their care averages $20,000 a year — for Crohn’s, Rheumatoid Arthritis, Lupus, Fibromyalgia, whatever.

      Now let’s get back to young people. (especially young men, who do not get pregnant.)

      The question is how many persons filing few or no claims do you need in order to achieve affordable premiums for all.

      Without running the numbers, I suspect that the number of no-claims persons needed is very high.

      • 20K is way to low. The rx embrel or copaxon alone will cost 24K to 36K. If your high risk people are hitting you for less than 50K per year they would be lucky.

        7 Million in the exchange will be a breeze, unfortunently most will be unhealthy and previously privately insured. The rest will be sick uninsured. Don’t worry for the first couple years 80% of loses are covereinsurance.te insurance

    • I looked at the CBO document reference in Austin’s original post and it seems to be from February, 2013. I am wondering if CBO will be updating their enrollment projections based on the info that has been gradually emerging on rates. Would they still be looking for 7M in year 1?

    • Nate, you are correct that $20,000 per unhealthy person may be too low.

      In the truncated federal high risk pool that is now closed to new entrants, the first 100,000 participants averaged $31,000 each annually in claims.

      As far as these losses being covered by some form of reinsurance or risk adjustment, my understanding is that this part of the ACA is barely off the ground. Way too late and possibly too little also.

      Aren’t we setting up for enormous premium increases in the SECOND year of the exchanges??