The average age of America’s non-elderly population is 32, but the average age of people who have enrolled in healthcare exchanges under Obamacare is 43, and that difference might be more than most insurance companies had counted on. (Since people over 65 have access to Medicare; they aren’t included in comparisons with the exchange population.)
“The insurers took adverse selection into account in setting their exchange rates, but our sense is that plans didn’t assume a more than 10 year difference in average age relative to the overall population,” writes Citi analyst Carl McDonald.
Average enrollment age varies widely by state
State-run exchanges have a slightly younger population than federally run exchanges, 42 years old versus 44, but there is also a large disparity between states: Washington D.C. has the youngest exchange population with an average age of 37, and West Virginia has the oldest at 47. For anyone thinking about using this as the basis of a stock picking strategy, age does correspond with expected healthcare costs, but untangling the web of state-by-state exposure won’t be easy to do.
“WellPoint shows up five times on this list of bad demographic states, as does Aetna, compared to three appearances for Centene / Molina, two for Humana, and one for CIGNA,” writes McDonald. “We wouldn’t read a whole lot into this, though. As an example, it seems likely that the bulk of WellPoint, Inc. (NYSE:WLP)’s exchange membership will come from California, where the average age is relatively favorable, at 42.1 years.”
Women were also slightly more likely to sign up at the exchanges, representing 54% of enrollees. Since women tend to have higher healthcare costs, this will also contribute to adverse selection for the exchanges overall.
Silver is the most popular Obamacare plan
Silver products are the most popular nationwide, chosen by 60% of the enrolled population, followed by bronze with 20%, gold with 13%, platinum with 7%, and the barebones catastrophic plans with just 1%. Bronze plans have the lowest premiums but they also have high copays, so the high percentage of silver plans implies that people didn’t just choose the nominally cheapest option. It also implies that the people who have signed up for the exchanges do expect to be going to the doctor often enough to justify the more expensive upfront payment.