Kathleen Sebelius: “Lies, damned lies, and statistics”
And two words that will be the final nails in Obamacare's coffin: lapse rate
Mark Twain would have just loved Obamacare, and likely swooned over Kathleen Sebelius. If anything would have proved the accuracy of his observation that “there are three kinds of lies: ‘lies, damned dies, and statistics,’ ” it’s the delusional numbers that occasionally emanate from her office regarding the “progress” of Obamacare enrollments to date.
We’ve just been told that “enrollments” in Obamacare ”surged” to 4.2 million through February. “Enrolling” means absolutely nothing…it’s the equivalent of putting something in your shopping cart at Amazon. It’s if and when you actually pay for your book, DVD, or policy that counts. That’s the real number, the only meaningful one.
Yet when repeatedly asked how many “enrollees” have actually paid for their policies, we’re told those numbers aren’t readily available. That is pure, unadulterated BS. They know the numbers, every insurance company executive has them at their fingertips. Yet they won’t dare leak it, to stay on the good side of the government. ( That’s what happens when you get “nationalized” under the radar.) If they were favorable, they’d be shouted from the windows of HHS. Yet the vast majority of the MSM blindly accepts these faux stats; indeed, they cite them as “evidence” that Obamacare’s finally succeeding.
The fact that they’re not telling us these numbers means that they’re probably worse than we think. But the problem is far bigger, and far worse than that.
Allow me a brief background explanation/summary: Obamacare, to work, was designed so that about 38% of those signing up would be young, healthy, and willing to pay premiums that are double the market rate (to subsidize the older and sicker participants.) If not enough young, healthy individuals sign up, then the death spiral ( to the extent that medical costs incurred exceed premiums) kicks in, Obamacare blows up, and the US Treasury hands the insurance companies buckets of $$$ to make them whole. Right now it appears that the number of young, and healthy enrollees is about 25%, and NOT the 38% needed to make Obamacare work as originally designed.
Obamacare was forecasted/designed to have 7 million participants at the end of the March 31st date. It looks like they’ll end up with about 5 million.
Now here’s where it gets really, well..interesting:
1. Some analysts suggest that the conversion rate ( the percentage of those who enroll who actually end up paying their premiums) will be 80%. That’s a pipe dream; it’s going to be lower, much lower. They’d be ecstatic if it was 70%. (Let’s go with that number for now in our analysis.)
2. Young, healthy individuals behave differently than older, sicker ones, for a variety of self-evident reasons. Thus we can reasonably expect that the percentage of younger, healthier “enrollees” who actually pay their premium will be much lower. I predict it will be BELOW 50%.
3. Stay with me. It gets worse. Insurance companies fret constantly about their “lapse rates.” That’s broadly defined as the rate at which policies are renewed after their first year. The companies watch this number very carefully, because the longer a policy stays on the books, the more profitable it is to them. And because they study this very carefully, they know to a high degree of certainty why policies are more likely to lapse within the first year.
To date. we have heard absolutely nothing from Sebelius about projected lapse rates
4. There are two major factors that determine lapse rates:
A. The age of the policyholder. Younger individuals lapse policies at a far greater rate than those purchased by older people.
B. The frequency and method of premium payment. Policies with annual billing lapse far less often than those that bill semi-annually, or quarterly. Those with monthly billing (Obamacare) have the worst lapse rate. Those that rely on direct monthly billing, and not with some type of automatic premium payment/deduction fare the worst. In some instances, half of all those policies issued don’t make it through the first year.
See where we’re headed here?
After the March 31st date, and after “Stats” Sebelius finally deigns to tell us the actual number of “enrollees” who paid their premium, it’s all rapidly downhill from that point on.
OK, let’s do the math, shall we? Our own set of “lies, damned lies, and statistics.” (I’m going to use round numbers here, OK?)
Obamacare was predicted to have 7 million enrollees, 38% of which would be young and healthy, or 2,660,000. They’d be thrilled if 80% of those, or 2,130,000 actually paid their premiums.
By their own numbers, that gives them a little more than 2 million young healthy individuals smiling happily and paying double the market rate for health care.
Alternatively, what if only 5,000,000 enroll in Obamacare, and only 25 % fall into the young and healthy category? That gives us 1,250,000 to start with. And let’s assume that their conversion rate is a far more realistic 60% ( and I think it’s going to be much lower). That gives us 750,00 paying into the system INITIALLY. And if we assume a lapse rate of 40% within the first year, that’s a little more than 450,000 ultimately paying to support the system.
So, then: 2,000,000 or 450,000 in the key “young and healthy” demographic? Place your bets, ladies and gentlemen!
We shall soon see if Sebelius’, or my “lies, damned lies, and statistics” are reality.