More About Sarah Lueck

Sarah Lueck

Lueck joined the Center in November 2008 as a Senior Policy Analyst.

Full bio and recent public appearances | Research archive at

Big Issue for Insurance Marketplaces Is Enrollees’ Health, Not Age

February 14, 2014 at 1:02 pm

Despite what you may have heard, the share of enrollees in the new insurance marketplaces who are young isn’t the most critical factor in determining whether the marketplaces’ risk pool will be well balanced and whether their premiums may have to increase next year.  Instead, the health status of enrollees is far more important.  That’s the conclusion of a recent Commonwealth Fund-organized gathering of insurers, actuaries, researchers, and federal officials.

The misplaced idea that success hinges on whether enough young people sign up — since young people are generally healthier and thus less costly to cover — has gained undeserved traction in recent months.  And the release of the latest federal data on marketplace enrollment, including a breakdown by age, will likely bring renewed attention to the number of young enrollees.  But, as a Commonwealth report summarizing the meeting concludes, “there is no single right percentage for young adult participation.”

We made the same point a few weeks ago, explaining that the health status of enrollees at all ages is far more important in producing a balanced risk pool and ensuring that the marketplaces will have stable and affordable premiums over time.  Also important is how well each insurer predicted who would sign up for coverage this year.  If an insurer’s enrollees cost far more than it anticipated in setting its 2014 premiums, it might raise premiums in 2015 to better reflect its expected costs.

The Commonwealth Fund report also highlights some factors that could limit any losses that insurers may experience this year, which in turn could tamp down any 2015 premium increases.

For example, health reform’s risk corridors (along with its other risk-mitigation programs) limit insurers’ potential losses as the law’s major reforms take effect in the individual market and the new marketplaces become fully established.  And two health reform requirements — that insurers justify premium increases of 10 percent or more and spend a set percentage of their premiums on medical care rather than administration and profits — are expected to help hold down any rate increases in 2015.

It’s Too Soon to Go Negative on Health Reform’s Marketplaces

February 3, 2014 at 3:46 pm

Moody’s recently changed its outlook for health insurers from stable to negative, based in part on concerns about whether enough young, healthy people are enrolling in plans through the new health insurance marketplaces (also known as exchanges) under health reform.

This announcement by the well-known credit rating agency stoked another round of fretting about the marketplaces’ viability.  But it’s far too early to draw conclusions about the marketplaces.

Moody’s based its industry outlook in part on the mix of the insurance risk pool:  whether enough people with lower health costs will join, balancing out the higher costs of those with greater health needs.  But the data that will answer this question is still being generated, as we have explained — and it’s far more individualized per company than the rating agency’s sweeping, industry-wide generalization.

And although Moody’s cited a concern that that enrollment of younger people is lagging, the health status of enrollees is far more important to the risk pool’s balance than their age.

Risk pooling occurs within each state and on an insurer-by-insurer basis.  How any given insurance company that offers marketplace plans will fare depends substantially on how accurately it predicted who would enroll in its plans and the costs they would incur.  (WellPoint, one of the major Blue Cross and Blue Shield insurers, has highlighted this, saying that its preliminary analysis of who is enrolling in its plans is tracking with its assumptions when it set its marketplace premiums.)

Moody’s said several issues contributed to its negative outlook for the insurance industry.  For example, it said the Obama Administration’s recent decisions to allow people more time to enroll for 2014 and to keep policies that don’t comply with all the 2014 standards may add more risk than it previously expected for insurers this year.  But another factor that Moody’s raised is older news:  the coming announcement of reduced Medicare Advantage payments for 2015, which merely involves implementation of scheduled cuts enacted under health reform.  Moody’s assessment of the health insurance industry should have already factored in those cuts.

Amid the speculation about the impact that health reform will have on private insurance markets, it will take time to understand what is happening in this first year of implementation.  It’s far too early to declare that the news is bad.

Don’t Panic Over Early Health Reform Enrollment Data

January 15, 2014 at 1:57 pm

New federal data show that enrollees in health reform’s new health insurance marketplaces are somewhat older than some expected, spurring talk that premiums could rise and even that the law itself is at risk.

But it’s no time to panic, for several reasons.

  • First, it’s early.  People have until March 31 to enroll in marketplace coverage, and enrollment will likely grow substantially by then.  The new data show a swell of enrollment among younger people in December, and federal officials said they expect that to continue.
  • Enrollees’ health status matters more than their age in determining whether the marketplace has a balanced, stable risk pool.  A 20-year-old with significant health needs costs an insurer more to cover than an older person who doesn’t use many medical services, and insurers need healthy people of all ages to balance out the pool.  (As the Kaiser Family Foundation’s Larry Levitt tweeted:  “Will we get the 60-year-old gym rats?”)  We aren’t likely to know the relative health of marketplace enrollees for some time — until enrollees start using health services and insurers examine their claims data.
  • Whether the pool is balanced is a state- and insurer-specific question.  The new data show national and state-specific enrollment in the insurance marketplaces.  But 2014 risk-pooling occurs within each state and on an insurer-by-insurer basis; it also includes enrollees in the individual market outside of the marketplaces as well as marketplace enrollees.  When thinking about how the 2014 risk pool could affect what premiums insurers charge in 2015, what really counts is how accurately a particular insurer predicted the mix of people it would enroll in its plans in a given state when it set its 2014 premiums (and what it expects for 2015).  If an insurer’s enrollees are in poorer health, on average, than the insurer predicted for 2014 and the insurer expects the trend to continue in 2015, it could raise premiums for 2015.  But if actual enrollment was in line with expectations, there should be no effect on premiums.
  • Even a sicker-than-expected pool of enrollees won’t necessarily translate to significantly higher premiums in 2015.  Insurers will weigh a number of factors when they set their 2015 premiums, such as who they expect to enroll next year and how their prices will stack up next to their competitors.  Some companies will want to keep premiums down to maximize their market share as more people become familiar with health reform’s benefits and enroll in marketplace plans, and as the penalty for not having health insurance further encourages healthy people to obtain insurance.  In addition, health reform already includes several programs to compensate insurers if their costs are higher than expected, and insurers will factor that into their 2015 premium rates.

Why the Obama Approach to Health Policy Cancellations Is Preferable

November 19, 2013 at 3:31 pm

Responding to a wave of insurer letters notifying people that their current individual-market health plans won’t be available next year, Senators Mary Landrieu and Joe Manchin have proposed requiring insurers to permanently continue existing individual-market plans.  Our new report explains why this would likely drive up premiums in the new insurance marketplaces, weakening their chances of survival.  If the marketplaces unravel, millions of uninsured people expected to gain coverage under health reform (the Affordable Care Act or ACA) will lose access to coverage.

The Administration’s alternative proposal — to allow insurers to extend into 2015 any health plans they offer in the individual or small-group market that don’t comply with health reform’s standards and consumer protections — is also flawed but would be less damaging, as our report explains:

In general, both the Administration’s new policy and recent House and Senate proposals would prompt larger numbers of healthier-than-average people to remain in non-ACA-compliant individual-market plans outside the marketplaces; that, in turn, would cause the pool of people in the marketplace plans to be sicker, on average, than it otherwise would be.  This “adverse selection” would produce higher premiums in the marketplaces, particularly for 2015.  Depending on how many healthier people remained outside the marketplaces, the more far-reaching proposals — including the Landrieu-Manchin bill and the bill the House passed on November 15 — could trigger sticker shock when the 2015 premiums for marketplace plans are announced next October, just a few weeks before the congressional mid-term elections.

The Administration’s policy has strong advantages over the Landrieu-Manchin and House bills.

  • It doesn’t allow new people to enroll in non-ACA-compliant plans, as the House bill would.
  • It leaves the decision of whether to extend the non-compliant plans to insurers and states.  This means that fewer people will remain in such plans, and less adverse selection will result, than if the policy required insurers to offer them, as under Landrieu-Manchin.
  • It extends the non-compliant plans through 2015, rather than permanently, as under Landrieu-Manchin.
  • It is an administrative action and thus doesn’t require legislative action that could open up the ACA to even more harmful statutory changes that could push marketplace premiums up markedly, undercut the ACA’s insurance-market reforms, and threaten the long-term viability of the new marketplaces, without which millions of Americans will remain uninsured.

Click here for the full report.

Upton Bill to Allow Insurers to Offer Non-Compliant Plans Would Undermine Health Reform

November 13, 2013 at 2:32 pm

The House is planning to vote this week on a bill allowing insurance companies to continue offering existing individual-market health plans through 2014 — even if the plans do not comply with health reform’s new standards and consumer protections.  The bill, sponsored by House Energy and Commerce Committee Chairman Fred Upton (R-MI), would jeopardize the Affordable Care Act (ACA) in several ways, as we explain in a new paper.

The Upton bill would allow health insurers that had individual-market plans in effect as of January 1, 2013 to continue selling all of those plans throughout 2014.  And, the plans would be available to new enrollees as well as current ones.

Here are some of the major problems it would cause:

It would raise premiums significantly. By encouraging healthier people to remain in non-compliant individual-market plans outside the new insurance marketplaces (also known as exchanges), the bill would make the pool of people enrolled in plans offered through the marketplaces sicker, on average, than under current law.  That would raise marketplace premiums for coverage in 2015 and beyond (and possibly even for 2014), and could trigger sticker shock when the premiums for 2015 are announced next October.

It would threaten the insurance marketplaces’ long-term viability. While the Upton bill would extend the availability of non-ACA-compliant plans only through 2014, there would be pressure next summer and fall to extend their availability through 2015 or (more likely) permanently.  That would permanently raise premiums in marketplace plans, further discouraging healthy people from enrolling and threatening the marketplaces’ long-term viability and, hence, the extension of coverage to millions of uninsured near-poor and middle-income Americans.

It would undermine new insurance market reforms. The Upton bill would likely undermine the ACA’s reforms to the individual market that take effect in 2014, such as the prohibitions against denying coverage for pre-existing conditions, charging higher premiums based on an individual’s health, and offering plans with glaring gaps in coverage, which can leave people subject to catastrophically high costs even though they are insured.  If a large market of non-ACA-compliant plans continues to exist through 2014, as it would if insurers could continue all existing individual-market plans, individuals enrolled in ACA-compliant plans inside and outside the marketplaces would face sharply higher premiums.  This dynamic could eventually make the market reforms unworkable.

It would create new problems for an already troubled open enrollment period. The bill would further disrupt the open enrollment period that started on October 1, and could result in confusion that deters some consumers from enrolling in marketplace plans that offer more comprehensive benefits at lower cost.

Ultimately, the Upton bill would undermine health reform — and hurt the millions of Americans who are expected to benefit from the improved coverage and subsidies available through the new health insurance marketplaces.

Click here to read the full paper.