In the debate over the progress of health care reform we may be losing sight of the long-term goals of the Affordable Care Act (ACA). The ACA aims to make health insurance more affordable, improve access and quality of care, and increase transparency of the health care delivery system.

A key instrument for expanding affordable coverage for millions is the Health Insurance Marketplace (Marketplace). The federally-facilitated Marketplace has performed miserably during the first two months since its rollout. A number of the state-run Marketplaces have fared relatively better.

How successful have these Marketplaces been in providing health care coverage for the potential enrollees? One way to answer this question is to examine the percentage of potential enrollees that has purchased coverage through these Marketplaces so far.

ACA and Health Insurance Marketplaces

One of the key provisions of the ACA is to create Marketplaces for those who purchase health insurance coverage for themselves. By removing hurdles that keep people with history of health conditions from purchasing health insurance coverage and offering various financial incentives, these Marketplaces are designed to expand coverage options for those who are now uninsured or those who directly purchase their health insurance coverage.

But who are likely to purchase coverage through these Marketplaces?

Individuals eligible for premium-assistance tax credits are most likely to purchase health care coverage through the Marketplaces because tax credits are available only for coverage purchased through these Marketplaces. Individuals who are not eligible for any tax credits may also purchase coverage through these Marketplaces, although they can purchase similar coverage sold outside of the Marketplaces.

Kaiser Family Foundation (KFF) estimates that about 17 million people will be eligible for premium tax credits in 2014. Three of the states—California, Florida, and Texas—each has more than one million residents who will be eligible for tax credits.

KFF further estimates that about 29 million people nationally could purchase health insurance coverage through the Marketplaces. This number includes both tax-credit eligible and non-eligible individuals. In six states more than one million could purchase coverage through the Marketplaces.

Yardsticks for Assessing Marketplace Enrollment

Both of the above estimates of individuals likely to purchase through Marketplaces offer reliable yardsticks for assessing progress of coverage in these Marketplaces. The difference between each of these estimates and the actual enrollment so far shows the gap in coverage.

Percent of potential marketplace enrollees covered by a QHP

To illustrate this point, in this chart we show Marketplace enrollment to date as a percentage of the estimated total number of people who could purchase coverage through Marketplaces by state. It is important to note that this percentage and the gap in coverage are snapshots as of a particular date and they are going to change as Marketplace enrollment increases over time.

For this analysis, we use Marketplace enrollment data made available by the Department of Health Human Services on December 11, 2013. All the enrollment information available is as of November 30, 2013. These enrollment numbers represent the total number of individuals who have been determined eligible to enroll in a plan through the Marketplace and who have subsequently selected a plan, irrespective of whether first premium payment have been received directly by the Marketplace or the issuer of the policy.

This chart shows that as of November 30, 2013, the percentage of total potential enrollees covered by different Marketplaces is fairly modest. The percentage of total potential enrollees covered in the top five states (in the order of the percentage covered), is as follows: Vermont (11.08%), Connecticut (5.38%), Kentucky (4.35%), Rhode Island (3.81%), and New York (3.60%). Thus, there is a larger than 95% gap in covering potential enrollees in most Marketplaces. Sadly enough, the gap is as high as 99.0% in a number of states. This chart indicates that the Marketplaces have a long way to go before they cover all the potential enrollees.

Alternative Measures

Percent of credit-eligible Marketplace enrollees covered by a QHP

It is reasonable to assume that some of the potential enrollees in the Marketplaces, especially those who are not eligible to receive any tax credits, would end up purchasing coverage available outside of the Marketplaces. Thus, the potential enrollees using Marketplaces could be lower, which would imply smaller coverage gaps than those calculated above.

To account for this possibility, we also calculate actual enrollment as a percentage of potential credit-eligible enrollees only.

As shown on the chart on the right, the results are qualitatively similar to those above. Even using potential credit eligible enrollees, the percentage of potential enrollees covered so far through Marketplaces is modest.

Additionally, the percentages generated using this method likely overestimate the enrollment percentages because some of the enrollees not eligible for tax credits will purchase coverage through Marketplaces. For example, more than 84% of those who purchased coverage through Covered California in October 2013 are not eligible to receive any tax credit. We will not know the full extent of such bias until we have a break down of enrollment from all states

It is also plausible that a program as complex as the health care reform could have slow ramp-up period because of a range of issues. Again, that could make the number of potential participants in the Marketplace lower.

In fact, the Congressional Budget Office (CBO) projected that nationwide 7 million individuals will enroll in the Marketplaces in 2014. About 6 million of these individuals will be eligible for tax credits. The CBO further projects that nationwide 22 million will enroll through Marketplaces in 2016. That number is projected to go up to 25 million by 2018.

Percent of CBO estimated Marketplace plan enrollees covered by a QHP

The CBO projections for 2014 Marketplace enrollment indicates nationally about 24.5% of all potential Marketplace enrollees will enroll through Marketplace during the first year. We use this ratio to estimate the number of potential Marketplace enrollees at the state level. Next, we calculate an alternative measure of the enrollment gap based on these estimates.

The chart shows the results based on that analysis.

As expected, the coverage gap narrows when we use the CBO enrollment projections. As of November 30, 2013, more than 45% of the projected number of Marketplace enrollees in 2014 are covered by a Marketplace plan. The next four states, in terms of percentage of projected enrollees covered, are Connecticut (22.01%), Kentucky (17.79%), Rhode Island (15.58%), and New York (14.71%). There are two other states, Washington(14.32%) and California (13.30%), which have covered more than 10% of the projected Marketplace enrollees.

Thus, even using a more conservative estimates of potential Marketplace enrollees, the coverage gap remains large.

As states ramp up enrollment, this gap will get narrower. However, given the deadline of December 23, 2013, for starting coverage on January 1, 2014, the Marketplaces have an uphill task on their hands.

Conclusion

After a disappointing start, health insurance Marketplaces have started picking up enrollment.

However, as the above charts show, significantly large number of potential enrollees in these both federally-facilitated and state-run Marketplaces are yet to choose coverage.

In almost all the states the coverage gap is substantial and the states have a long way to go before bridging the gap.

 

* This post reflects analysis based on enrollment numbers made available by the Department of Health and Human Services on December 11, 2013. An earlier version of this post used data available at the time of the post.