Young Adults are Still Not Enrolling in Obamacare and the Reason Is Simple: Cost

Young adults have not been signing up for Obamacare at nearly the rate expected, or needed, for it to be financially sound. Initially, that wasn’t particularly worrisome. The White House and many economists simply assumed that they were healthy, tended to procrastinate and would sign up as the deadline neared.

But with only 15 days left to go in the open enrollment period—the span of time where you can purchase insurance in the exchanges—those assumptions are not bearing out. Bloomberg’s Megan McCardle writes:

So my general assumption — which is also what a lot of other people are assuming — is that the “young invincibles” are going to show up later. Unlike the sick or the previously insured who wanted to maintain continuous coverage, the young invincibles do not feel an urgent need for insurance. Maybe they’ll get around to it, but they weren’t rushing to make a December deadline.

What the Gallup numbers suggest is that instead of ramping up their purchases, that critical group of young, uninsured people may actually be slowing them down; the percentage of uninsured in the population barely budged from January to February, after showing big drops from October to January.

The Gallup numbers she’s referencing show that the uninsured rate isn’t falling nearly as fast as it was in December, which also tracks with a separate report released by the Department of Health and Human Services showing that the number of enrollments has slowed dramatically since the calendar turned.

That survey found that about 940,000 people signed up for exchange coverage in February, far below the 1.14 million that signed up in January and the 1.27 million projected by CMS for February. Those declining numbers – occurring at a time when conventional wisdom assumed accelerating enrollment – should come as a huge concern to the Obama Administration.

But the bigger problem, as McCardle hints at above, isn’t the overall number, it’s the make- up of that number. And CMS’ survey showed that young adults, a proxy for healthier, and thus cheaper to insure people, made up only 25 percent of total exchange signups. That’s off disastrously from the 40 percent that the White House previously estimated it would need to have an actuarially sound risk pool.

Sadly, even that 25 percent figure may be wildly inflated. POLITICO’s Kyle Cheney reports:

The White House insists it doesn’t know how many people are fully enrolled in Obamacare but insurers say they’ve handed over enough data to show that the sign-up numbers are not as rosy as federal officials say.

The latest administration figures show that 4.2 million people have selected health plans in the new insurance markets. Insurance industry officials at four of the big national health plans tell POLITICO that about 15 to 20 percent people who have signed up have not yet paid their first monthly premium — the final step to get coverage.

“They have a lot more information than they’re letting on,” one industry source said of the Obama administration. “They have real hard data about the percent that have paid … If they have not processed those yet and compiled the data, that is a choice they are making. But they have that data now.”

The biggest reason young adults aren’t enrolling is costs. A McKinsey survey found that affordability of the offered plans was the primary concern for half of the people who had not enrolled. That problem isn’t expected to abate. Indeed, HHS Secretary Kathleen Sebelius testified on Wednesday that insurance premiums are “likely to go up” in 2015.

Just how much is yet to be determine, but it will largely depend on the demographic composition of the insured population. And if young adults continue to make the economic decision to avoid Obamacare then rates could soar further. That’s the dreaded “death spiral” that the White House i