Young Avoid New Health Plans - Early Buyers of Coverage Are Older Than Expected, Raising Expense Concerns

From The Wall Street Journal:

Insurers say the early buyers of health coverage on the nation's troubled new websites are older than expected so far, raising early concerns about the economics of the insurance marketplaces.

If the trend continues, an older, more expensive set of customers could drive up prices for everyone, the insurers say, by forcing them to spread their costs around. "We need a broad range of people to make this work, and we're not seeing that right now," said Heather Thiltgen of Medical Mutual of Ohio, the state's largest insurer by individual customers. "We're seeing the population skewing older."

In states that are running their own marketplaces and have seen smoother rollouts, officials are now also reporting a similar phenomenon, suggesting the economics of the law play a role, too. In Connecticut and Kentucky, which have enrolled more than 4,000 people each in private health plans so far, the largest segments of enrollees in new commercial health-law plans are over age 55, much older than industry actuaries say they had anticipated. Each state ultimately expects to register several hundred thousand people in their exchanges.

The law bars insurers from charging sicker customers higher rates, and limits the amount they can charge older people compared with younger ones. It offers new subsidies to help cover premiums available to many lower-income applicants. Insurers are relying on a steady stream of younger, healthier enrollees to offset medical bills of older, sicker customers.

"The more sick people who do enroll, the more exposed [insurers] become," said Jim O'Connor, an actuary for Milliman Inc., a consulting firm.

The law includes provisions to ease the risks insurers face. For instance, federal funds will reimburse insurers for certain losses if they underestimate costs. But, actuaries say if the overall pool of customers is significantly older than expected, those provisions may not be enough to protect insurers against losses.

The website problems have attracted a backlash in Washington, where Republican lawmakers, and some Democrats, have called for an extension of the enrollment period, which ends in March, or a delay of a crucial health-law requirement that people obtain coverage next year or pay a tax penalty.

"There has to be a sufficient window for citizens to be able to exercise their judgment in signing up," Sen. Jeff Merkley, an Oregon Democrat, said last week.

Either approach could reduce the incentive for healthy people to get coverage, meaning insurers would have to increase rates next year "to account for fewer young and healthy people signing up for coverage," said Robert Zirkelbach, a spokesman for America's Health Insurance Plans.