The Bear Case for Obamacare Enrollment: Citi Research

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Citi Research HMO analyst Carl MacDonald, believes that the enrollment numbers for Obamacare exchanges will be disappointing, contrary to a bullish conviction from the research firm’s hospital analyst Gary Taylor.


MacDonald supported his bearish position with three potential issues that could limit the enrollment of people in public health exchanges in 2014. According to MacDonald, the limited value from exchange products, technology and IT issues, and lack of understanding about Obamacare, could restrict the enrollment.

See: The Bull Case for Obamacare Enrollment

The value problem for Obamacare

In his report, MacDonald recognized the fact that many eligible low-income individuals such as those making up to $17,000 (150 percent of poverty) are eligible for “free” health insurance in 2014. He explained that they can purchase health insurance with a bronze plan without paying a monthly premium.

However, he argued that the value consumers get from a bronze plan is unclear because it comes with huge cost sharing, which is impossible for a low-income individual to afford. He emphasized that a $60-copay to see a doctor, a 30% coinsurance on hospital visits, and a $5,000 deductible for medical and drugs are expensive for people with low income.

MacDonald further explained that a 40-year-old person whose income is 150 percent of poverty ($17,235) will pay a maximum premium of 4 percent, or $693 annually/$57 monthly for a silver plan health insurance (4 percent x 17,235). According to him, a silver plan from Blue Shield health insurance has a premium of $252 a month ($3,024 annually).  This means that the 40-year old person will receive a subsidy of $2,331 ($3,024-$693) from the government.

The Bear Case for Obamacare Enrollment: Citi Research

“Our issue is that while it’s true that lower income members can purchase a Bronze plan for little to no premium, there are significant cost sharing barriers that could prevent the member from actually receiving care,” said MacDonald.

Read: The Bull Case for Obamacare

The system’s issues

According to MacDonald, the system’s issues and other IT glitches affecting the exchanges will definitely not help improve enrollment. For example, in Colorado the local agency was not satisfied with the tax credit computations, meaning that people interested in knowing if they are qualified for a subsidy will have to call a customer service center, at least until November.  In Oregon, IT glitches caused inaccurate reporting of deductibles, which prompted the director of the exchange in the state to postpone a series of advertisements promoting its website. Several other states experienced technical problems.

McDonald also pointed out that the reliability of the performance of the federal data hub is still uncertain. The data hub will serve as a one electronic connection and near real-time access to determine eligibility, thus it needs to verify Social Security Numbers (SSN), obtain information from the Internal Revenue Service (IRS), and Department of Homeland Security (DHS) to determine the income, citizenship, and immigration status of an enrollee.

The data hub also needs to access other government agencies to determine if an applicant is qualified to receive coverage from other programs that may disqualify the person to receive subsidies from the exchanges.

Lack of awareness

Lack of Awareness obamacare

MacDonald emphasized that many consumers (51 percent) said they do not have enough knowledge regarding the impact of health care reform. Surveys also found that 67 percent of uninsured people said they did not receive enough information, and only 12 percent knew that the insurance exchange’s open enrollment will start on October 1.

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