October 22, 2014 | Backgrounder on Health Care
Health insurance enrollment data show that the number of Americans with private health insurance coverage increased by a bit less than 2.5 million in the first half of 2014. While enrollment in individual market coverage grew by almost 6.3 million, 61 percent of that gain was offset by a reduction of nearly 3.8 million individuals with employer-sponsored coverage. During the same period, Medicaid enrollment increased by almost 6.1 million—principally as a result of Obamacare expanding eligibility to able-bodied, working-age adults. Consequently, 71 percent of the combined increase in health insurance coverage during the first half of 2014 was attributable to 25 states and the District of Columbia adopting the Obamacare Medicaid expansion.
With enrollment data now available for the second quarter of 2014, it is possible to construct a complete picture of the changes in health insurance coverage that occurred during the initial implementation of the Patient Protection and Affordable Care Act (PPACA), commonly known as Obamacare. The data show that in the first half of 2014, private health insurance enrollment increased by a net of 2,465,586 individuals. That net figure reflects the fact that 61 percent of the gain in individual coverage was offset by a drop in employer group coverage. During the same period, Medicaid enrollment grew by 6,072,651 individuals. Thus, while a total of 8.5 million individuals gained coverage, 71 percent of that net coverage gain was attributable to the Obamacare expansion of Medicaid to able-bodied, working-age adults.
Health insurers file quarterly reports with state regulators, and data from those reports for the second quarter of 2014 are now available. The three relevant market subsets for this analysis are (1) the individual market, (2) the fully insured employer-group market, and the (3) self-insured employer-group market. Table 1 shows the changes in private health insurance enrollment during the first and second quarters of 2014, along with the net changes for the combined six-month period.
Obamacare’s initial open enrollment period began on October 1, 2013, and officially ended on March 31, 2014—though in a number of states it was extended into April to give those who had experienced problems enrolling additional time to complete the process. Because enrollment was for the 2014 plan year, the coverage for those who enrolled during the fourth quarter of 2013 took effect in the new year; thus, those individuals are included in the data for the first quarter (Q1) of 2014. The data for Q2 2014 captures enrollments that occurred during the last two months of the open enrollment period, or which were otherwise delayed due to the numerous problems experienced by the exchanges, and so did not take effect until after the end of the first quarter.
The data show that enrollment in individual market coverage increased by over 2.7 million individuals in Q1 2014 and by a further 3.5 million individuals in Q2. Thus, for the first half of 2014, enrollment in individual market coverage grew by almost 6.3 million individuals.
The second-biggest coverage change that occurred during the first half of 2014 was the decline in the number of individuals with coverage through fully insured employer group plans. Enrollment in such plans dropped by 3.8 million individuals in Q1 2014, and by nearly a million more individuals in Q2 2014. Thus, for the first half of 2014, the number of individuals with coverage through a fully insured employer group plan decreased by nearly 4.8 million.
Enrollment in self-insured employer plans modestly increased in both quarters—by 347,000 in Q1 2014, and by about 652,000 in Q2—for a net enrollment gain of a little less than one million during the first half of 2014. Consequently, the combined enrollment changes in the two segments of the employer group market during the first half of 2014 produced a net decrease of almost 3.8 million in the number of Americans covered by employer-sponsored plans.
That net reduction in employer-sponsored group coverage is explained by employers discontinuing coverage for some or all of their workers or, in some cases, individuals losing access to such coverage due to employment changes. While it is not possible to determine from the data the subsequent coverage status of individuals who lost group coverage, there are only four possibilities: (1) some obtained replacement individual-market coverage (either on or off the exchanges); (2) some enrolled in Medicaid; (3) some enrolled in other coverage for which they are eligible (such as a plan offered by their new employer, a spouse’s plan, a parent’s policy, or Medicare); and (4) some became uninsured.
If individuals lost group coverage, but obtained new coverage under either another employer group plan or one in the individual market, they would then be counted in the enrollment figures for those submarkets. Similarly, if individuals transitioned to Medicaid, they would be counted in the Medicaid enrollment figures reported by the Centers for Medicare and Medicaid Services (CMS).
As Table 1 shows, during the first half of 2014, net total enrollment for all three segments of the private coverage market increased by almost 2.5 million individuals. That was because reduced enrollment in employer-sponsored coverage offset 61 percent of the gain in individual-market coverage during the first half of 2014.
The PPACA required states to expand Medicaid eligibility to all individuals with incomes below 138 percent of the federal poverty level and not otherwise eligible for Medicaid under prior rules. Those individuals are able-bodied, working-age adults, the vast majority of whom do not have dependent children. However, in June 2012, the U.S. Supreme Court ruled that Congress could not force states to adopt that expansion. Since then, 27 states and the District of Columbia have chosen to adopt the expansion.
Table 2 shows the changes in Medicaid enrollment during the first and second quarters of 2014, along with the net changes for the combined six-month period.
According to the CMS reports, for the District and the 24 states that had the expansion in effect during the first half of 2014, and for which data are available, total Medicaid enrollment increased by 3,669,809 individuals in Q1 2014 and by a further 2,047,168 individuals in Q2 2014, for a total of 5,716,977 during the first half of 2014.
The law also changed the standards for determining eligibility for individuals who qualify for Medicaid coverage under prior law. Consequently, most of the states that have not adopted the Medicaid expansion also experienced some increase in enrollment. According to the CMS reports, for 24 of the 25 states that either did not adopt the expansion or did not have it in effect during the first half of 2014, Medicaid enrollment increased by 355,674 individuals during the first half of 2014.
Thus, for the 48 states and the District for which data is available, Medicaid and Children’s Health Insurance Program (CHIP) enrollment increased by a total of 6,072,651 individuals in the first half of 2014.
According to the final exchange enrollment report issued by the Department of Health and Human Services (HHS), 8,019,763 individuals selected an exchange plan during the open enrollment period. Yet, the market data for the first half of 2014 show that the net increase in total individual market enrollment (both on and off the exchanges) was 6,254,564 individuals—which equates to 78 percent of the exchange plan selection figure reported by HHS.
The difference is likely attributable to the following factors, though it is impossible to determine the magnitude of each from the available data:
While most of the attention has focused on the new health insurance exchanges, the data indicate that a significant share of exchange enrollments were likely the result of a substitution effect—meaning that most of those who enrolled in new coverage through the exchanges during the open enrollment period already had coverage through an individual-market or employer-group plan. Given that increased enrollment in Medicaid accounted for 71 percent of the net growth in health insurance coverage during the first half of 2014, the inescapable conclusion is that, at least when it comes to covering the uninsured, Obamacare so far is mainly a simple expansion of Medicaid.
—Edmund F. Haislmaier is Senior Research Fellow in the Center for Health Policy Studies, of the Institute for Family, Community, and Opportunity, at The Heritage Foundation. Drew Gonshorowski is Senior Policy Analyst in the Center for Data Analysis, of the Institute for Economic Freedom and Opportunity, at The Heritage Foundation.
We used the Mark Farrah Associates dataset, derived from insurer regulatory filings, for private-market enrollment by market segment. We excluded, as not relevant to our analysis, enrollments in: Federal Employees Health Benefits plans, Medicare Advantage plans, and supplemental coverage products (such as dental, vision, prescription drug, Medicare supplemental, and single disease).
For enrollment in self-insured employer plans we used the data reported by Mark Farrah Associates for plans administered by an insurance carrier. Mark Farrah compiles that data from insurer regulatory filings, supplemented by other public and private sources, such as Securities and Exchange Commission (SEC) filings. While the firm’s data on the self-insured market is the most comprehensive available, there are no reliable figures for enrollment in self-insured plans that are administered by independent third-party administrators (TPAs)—that is, TPAs that are not a subsidiary of an insurance carrier. However, based on its research, Mark Farrah Associates believes that truly independent TPAs likely account for no more than 5 percent of the total self-insured market.
For Medicaid and CHIP enrollment, we used the figures reported by CMS as they are the most current and include enrollment under both Medicaid fee-for-service and Medicaid managed-care plans. Because the CMS reports do not include enrollment data for December 2013, we used the enrollment figures for that month published in a report by the Kaiser Commission on Medicaid and the Uninsured as the basis for calculating enrollment growth during the first two quarters of 2014.
We made several adjustments to the Mark Farrah Associates private-market data to make it as complete and accurate as possible. Specifically:
The net effects of all the foregoing adjustments to the enrollment figures derived from the Mark Farrah Associates dataset were an increase of 95,194 for the individual market, an increase of 66,605 for the fully insured group market, and a decrease of 17,850 for the self-insured group market.
 Unless otherwise noted in the appendix, figures for private coverage in this report are derived from data compiled by Mark Farrah Associates, which is available by subscription. The Mark Farrah Associates dataset consists primarily of data from annual and quarterly insurer regulatory filings, supplemented by data on self-insured plans compiled by the firm from those and other public and private sources.
 In a “fully insured” plan, the employer purchases a group coverage policy from an insurer. In a “self-insured” plan the employer retains the risk but contracts with an insurer, or other third party, to perform administrative tasks, such as enrollment, provider contracting, claims adjudication, and claims payment.
 North Dakota is not included since data for that state is unavailable. Data for New Hampshire and Pennsylvania are included with non-expansion states since New Hampshire’s expansion did not take effect until July 2014, and Pennsylvania’s proposed expansion would start January 1, 2015.
 Maine is not included since data for that state is unavailable. Data for New Hampshire and Pennsylvania are included with non-expansion states since their expansions were not in effect during the first half of 2014.
 U.S. Department of Health and Human Services, Office of the Assistant Secretary for Planning and Evaluation, “Health Insurance Marketplace: Summary Enrollment Report for the Initial Annual Open Enrollment Period, for the Period: October 1, 2013–March 31, 2014 (Including Additional Special Enrollment Period Activity Reported through 4-19-14),” May 1, 2014, http://aspe.hhs.gov/health/reports/2012/ACA-Research/index.cfm (accessed October 7, 2014).
 Author conversation with LuAnne Farrah, president of Mark Farrah Associates.
 Laura Snyder, Robin Rudowitz, Eileen Ellis, and Dennis Roberts, “Medicaid Enrollment: December 2013 Data Snapshot,” The Kaiser Commission on Medicaid and the Uninsured, June 2014, Table A-1, http://kaiserfamilyfoundation.files.wordpress.com/2014/06/8050-08-medicaid-enrollment-december-2013-data-snapshot.pdf (accessed October 7, 2014).
 Arkansas Department of Human Services, “Arkansas Health Care Independence Program: State Legislative Quarterly Report April 1, 2014 to June 30, 2014,” http://www.arkleg.state.ar.us/assembly/2013/Meeting%20Attachments/000/I12671/Exhibit%20H.16c%20-%20DHS-DMS%20-%20Quarterly%20Healthcare%20Independence%20Report.pdf (accessed October 7, 2014).
 Covered California, “Individuals Enrolled from Oct. 1, 2013, Through March 31, 2014, with Subsidy Status, Across Region,” May 7, 2014, http://www.coveredca.com/news/PDFs/regional-stats-march/March_RegionalEnrollmentTables_forWeb_ss.pdf (accessed October 7, 2014), and NY State of Health, “2014 Open Enrollment Report,” June 2014, http://info.nystateofhealth.ny.gov/sites/default/files/NYSOH%202014%20Open%20Enrollment%20Report_0.pdf (accessed October 7, 2014).
 U.S. House of Representatives, Committee on Oversight and Government Reform, “Estimated vs. Actual Enrollment Figures for ObamaCare’s CO-OP Program,” June 2014, http://oversight.house.gov/wp-content/uploads/2014/06/ObamaCare-CO-OP-Enrollment-Figures-2014.pdf (accessed October 7, 2014).
 Steve Jordon, “Changes in Companies, Rates,” Omaha World-Herald, August 10, 2014, http://www.omaha.com/money/changes-in-companies-rates/article_2b91e1d4-9c63-5a34-bd61-78f47213dbb1.html (accessed October 7, 2014).