Affordable Care Act 2014: Reading the Tea Leaves — I

Reading the Affordable Care Act (ACA) tea leaves is a little like reading a foreign language you haven’t fully learned: you can translate a few words but you can’t discern the full meaning.

Nevertheless, the tea leaves tell us a few things about ACA 2014:

First the data—The New Year begins with over 2 million people having selected a plan through the federal or state health insurance exchanges (HIX) during open enrollment from October 1-December 24, 2013.

And the window for selecting an HIX plan will remain open until March 31, 2014, allowing even more to enroll. Chances are that the White House will come pretty close to hitting its 2014 plan selection goals.

But that leads to a second key point: how many of those individuals who have initiated enrollment will pay their premium on time and every month? Some speculate that up to half of those who have selected a plan may not complete enrollment by paying their monthly premium—in other words, they won’t actually be insured. That’s why many insurers are giving applicants until January 10 or later to pay their January premium. Who knows what they’ll do in February. The tea leaves tell us that the payments issue could become the ACA 2014 Achilles Heel.

Third, the “mix” of enrollees in the exchanges, known as the risk pool, will determine their financial viability. The ACA is built on the principle that younger and healthier enrollees’ premiums subsidize affordable premiums for older and sicker enrollees. If not enough “young invincibles” sign up in 2014, ignoring the ACA Individual Mandate, adverse selection could destabilize risk pools, leading to much higher premiums in 2015.

Of course, one of the biggest ACA 2014 questions is, what will employers do? And will Congress enact legislation to correct the ACA’s flaws? Predicting these will require another cup of tea. And we’ll read those tea leaves in subsequent blogs.