Why Some People Sign Up For Obamacare And Don’t Pay Their Premiums


President Obama announced that 8 million people signed up for Obamacare on Thursday, just as critics of the law try to downplay the validity of numbers ahead of the 2014 midterm elections. In fact, with every public release of data, conservatives have pressed the Department of Health and Human Services (HHS) to offer more specifics on on just how many of the newly enrolled were actually uninsured and what percentage of beneficiaries paid for their insurance premiums.

Those numbers are still uncertain, though the nation’s largest health insurers report that “15 to 20 percent of its new customers aren’t paying their first premium, which means, as the National Journal’s Sam Baker notes, that “they’re not actually covered.”

Is it concerning that so many people have signed up for insurance without coughing up a dime? Ken Jacobs, who heads the Center for Labor Research and Education at the University of California, Berkeley, doesn’t think so. He argues that the transient nature of the individual market means that some number of people will sign up for insurance and never use it.

“I expect some share of people who enrolled in September, November, December to have income changes or changes in life situation that would affect coverage needs,” he said adding that between one-third and one-half of those who enrolled, “especially in the early part, would have had a life transition, did not need coverage by the time that coverage starts.” Others may have had administrative problems in processing payments or had some change of heart about the insurance product.

The bottom line is that the market experiences fluctuations as people get a job that provides employer-based coverage and choose to leave the exchanges or get married and become dependents on their souse’s insurance. Open enrollment only captures part of the story, Jacobs explained, adding that “people who are coming in are coming in, but some people are leaving.” The labor center just published a study estimating that more than 40 percent of beneficiaries will leave the California exchanges by the following January.

Experience in Massachusetts, which enacted similar reforms in 2006, confirms this tend. “Among individuals, there is a significant increase in the number of individual subscribers in force for one year or less; this represents people ‘jumping’ into and out of coverage” a Massachusetts state report found. Though other factors were present in the Massachusetts market that are not at issue elsewhere in the nation, the churn of individual and small group subscribers is telling. In 2008, 107,343 individual subscribers enrolled, but just 62,282 remained active.