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Wall Street Journal Saturday January 18, 2014

By Christopher Weaver and Anna Wilde Mathews Updated Jan. 17, 2014 8:07 p.m. ET Early signals suggest the majority of the 2.2 million people who sought to enroll in private insurance through new marketplaces through Dec. 28 were previously covered elsewhere, raising questions about how swiftly this part of the health overhaul will be able to make a significant dent in the number of uninsured. Insurers, brokers and consultants estimate at least two-thirds of those consumers previously bought their own coverage or were enrolled in employer-backed plans. The data, based on surveys of enrollees, are preliminary. But insurers say the tally of newly insured consumers is falling short of their expectations, a worrying trend for an industry looking to the law to expand the ranks of its customers. About 48 million Americans were uninsured in 2012. The health law is expected to cut 25 million from that total by expanding state-run Medicaid programs and the pool of privately insured people who buy through state marketplaces, also called exchanges. Only 11% of consumers who bought new coverage under the law were previously uninsured, according to a McKinsey & Co. survey of consumers thought to be eligible for the health-law marketplaces. The result is based on a sampling of 4,563 consumers performed between November and January, of whom 389 had enrolled in new insurance. One reason for people declining to purchase plans was affordability. That was cited by 52% of those who had shopped for a new plan but not purchased one in McKinsey’s most recent sampling, performed in January. Another common problem was technical challenges in buying the plans, which 30% mentioned. Health Markets Inc., an insurance agency that enrolled around 7,500 people in exchange plans, said 65% of its enrollees had prior coverage. Around 10% were dropping out of employer coverage, either because the employer stopped offering its plan or because they could qualify for subsidies on the marketplaces. Fifteen percent had previous individual plans canceled, and 40% decided to switch into coverage bought through an exchange from previous individual plans. At Michigan-based Priority Health, only 25% of more than 1,000 enrollees surveyed in plans that comply with the law were previously uninsured, said Joan Budden, chief marketing officer. The trend underscores a central test for the health law, whose marketplaces are meant to steer a broad cross section of new paying customers to private insurers. “One of the intents of the law was to address the uninsured problem in our country,” said David M. Cordani, chief executive of insurer Cigna Corp. Cigna doesn’t yet know what coverage its health-marketplace enrollees

previously held. Explore how America’s health-care overhaul will affect you on this first-person adventure. CLICK THE IMAGE to start interactive experience. Many health plans and providers are looking for the expansion of coverage to fuel growth. Insurers need to draw healthy uninsured people to offset costs, given that plans can no longer deny coverage to people with pre-existing conditions. People have until the end of March to choose plans under the law, so more of the uninsured could still flock to the marketplaces. “We are in the middle of a sustained six-month open-enrollment period, and we have seen a strong interest in the product overall across the range of demographics so far,” said Aaron Albright, a spokesman for the Centers for Medicare and Medicaid Services. which is overseeing the rollout. “We are ramping up outreach activities so that more Americans learn how they can now benefit from affordable health insurance.” Department of Health and Human Services officials have said they don’t yet know the number of people who have signed up for coverage through the exchanges who had insurance at the time of their enrollment. The health law is chipping away at the number of uninsured consumers in other ways. At least four million people

are expected to join Medicaid rolls in the coming months. But so far, health-plan executives say, subsidies to buy insurance in the marketplace, and broader changes to the law, seem to be encouraging many already-insured people to seek better rates. In addition, some small companies are cutting back on coverage now that their workers can buy through the marketplaces, insurers and brokers say. At Priority Health, about 25% of health-law customers had employer-supported plans last year, Ms. Budden said, while 50% bought their own coverage last year. Of the latter group, about half are getting subsidies. Michigan insurers collectively expected 400,000 of the state’s 1.2 million uninsured people to join private plans this year, Ms. Budden said, citing an internal analysis of insurers’ rate filings. As of the end of December, only 76,000 enrollees had arrived, many of whom were previously covered. “I don’t know we’re growing the number of people with insurance here, so much as we’re just adding complexity,” said Geoff Bartsh, vice president for policy at Medica Health Plans in Minneapolis. It isn’t surprising that some percent of new purchasers of private health insurance are people who had insurance before. About 66% of people buying new individual health plans in early 2011 were covered by employer-backed plans in late 2010, according to a Kaiser Family Foundation analysis of federal survey data prepared for The Wall Street Journal. About 20% of enrollees in early 2011 were previously uninsured, the analysis found. There is “massive churn in the individual market, and always has been,” said Larry Levitt, senior vice president at Kaiser. “It wouldn’t surprise me if many [health-law enrollees] were insured in the last year,” he said, but “that doesn’t mean they wouldn’t have ended up uninsured if not for the exchanges.” Large insurers including Aetna Inc. and WellPoint Inc., and plans like Blue Cross & Blue Shield of Tennessee and Blue Shield of California, said they weren’t yet sure of what prior coverage their health-law enrollees may have maintained. Danny Robins, a Columbus, Ohio-based insurance broker for LyfeBank, a national consultant, said he has dismantled about 50 small employer-backed plans, some of which are steering workers to the new marketplaces. The 47-worker StateWide Ford dealership in Van Wert, Ohio, ended group coverage effective Jan. 1. About 23 workers previously covered by the StateWide-sponsored plan gained other coverage. Two enrolled in Medicaid, several joined their spouse’s employer-backed plans, and at least two gained federal subsidies to buy coverage in an health-law exchange. All but one worker got coverage at a better price, said Andy Czajkowski, the dealership’s owner. Now that insurers can’t charge unhealthy people higher rates, he said, the workers are better off on their own. “Last year, we couldn’t make that choice,” Mr. Czajkowski said. Irene Brunstein, of Queens, N.Y., who saw her coverage canceled under the plan, was quick to sign up for new health-law coverage to avoid disruptions. Ms. Brunstein, a semiretired 64-year-old lawyer, saw her Emblem Health plan canceled her $407-a-month plan in December because it didn’t comply with the

law. By New Year’s Day, she had chosen

and paid for a new health-law plan offered by the same insurer. The new policy costs less, $333 a month, and she’s eligible for a $94-a-month subsidy, further lowering the costs. She’s still frustrated by the new plan, which has a $3,000 deductible, higher, she says, than her prior coverage. “I don’t even think I have $500 a year in medical bills,” Ms. Brunstein said. “That’s a mighty tall mountain to climb.”