Is the Light Breaking Through?

I must say that Avik Roy's Forbes article surprised me a bit. I am so used to conservative pundits not engaging the facts honestly, so when one of the ACA's most severe and continuing critics puts out the above, I stop and take notice.

Now that the GOP has failed to stop or significantly change the ACA legislatively, there are only a few ways the law could be thwarted:

• If nobody signs up.
• The howl from those hurt by the bill ratchets up big time.
• A premium "death spiral" - premiums continuing up and enrollment down.

Enrollment looks solid. We will probably top 6.0MM, which is the CBO's revised forecast. Right now 20% haven't paid month one's premium. Suspect we'll be in the 5-10% unpaid range by the end of April. So we'll end Open Enrollment with solid numbers, a bit behind forecast, with no reason to change the forecast for 2015. At least that's the CBO's determination.

Medicaid numbers are confusing: How do you count new enrollees in non-expansion states? How about people who enroll in expansion states but were actually already eligible? Should the ACA get credit for raising awareness such that already eligible folks finally come in and sign up? These are good and legitimate questions. The way acasignups.net is doing it is to show a range, which right now goes from 2.5MM up to 7.7MM. I end up about splitting the difference, saying 5.4MM signups (expansion states only, includes enrollees who were already eligible). Original CBO forecast was 9.0MM, now revised to 8.0MM. We should hit this number, though conservatives will argue loudly for a lower number, stripping out the already eligibles. For Mediacid as for the Exchanges, the CBO has not adjusted forecasts for 2015 and beyond.

So enrollment looks fine. How about the complaint level? Conservatives have been waiting for another shoe to drop when small businesses have to renew their coverage for 2015, moving up to the often stiffer requirements of the ACA. They have also been expecting blowback when the employer mandate goes into effect for 2015 and employers have to "face the music". So when the Administration recently delayed the employer mandate for companies with under 100 employees for another year, conservatives were beside themselves. Given all that, here's my best guess:

• The small business move to ACA compliant plans will cause some problems, but no significant disruption. Unlike the individual market where people receive cancellations directly, for small businesses there will be some HR individual who will plan for and mediate this change. Employees will often have to pay somewhat more but this bump will be absorbed.
• Delaying the medium-sizes employer mandate was good strategy - spread out the sometimes painful ruffles and give companies more time to plan and adjust.
• Large companies will not make substantial changes with their mandate kicking in for 2015. Almost 95% of these firms are already offering ACA-compliant plans; so no need for wholesale changes. Company costs will go up and part of this will be passed on to employees; but this is nothing new. And when Home Depot or Target cut some of their part-time workforce loose, it's because they know that with subsidies, the Exchanges will provide a better deal for their people.

So what about the dreaded premium/enrollment "death spiral"? As I've been saying for some time, and now Roy is agreeing, it won't happen. Since there are 50 different state marketplaces, we will most likely see some places where premiums spike, or insurers pull out of the market. But it seems that most of the insurance industry agrees with the Wellpoint CEO, who told a recent conference that he was pleased with the numbers coming in, that pools seem pretty balanced versus their estimates, and that they believe these Exchanges represent a great opportunity for the future. My guess (unchanged): 2015 premiums will be up 5% or less as an overall average.

Will the GOP come together on a plan and push it out as an ACA replacement as Roy advocates? The Coburn-Burr-Hatch plan in the Senate is a possibility; but I don't think they'll organize behind it - they just don't want to give Dems a way to shift the conversation away from the ACA.

Will this work? It might and it might not. The real question for the midterms is who will show up? The normal midterm skews older with fewer minorities, a mix that is favorable to Republicans. In 2010 this is the electorate that showed up, with a fired up and angry white working class base, leading to the GOP wave victory. What if the ACA is generally thought to be working by summer, and no one is really being pummeled, and the economy is improving - might the "angry base" stay home? Could Dems convince more Hispanics, other minorities and single women to show up more than they normally do?

It's possible - not likely, but possible; which is why I forecast the Dems to hold the Senate and gain a few in the House.