Reform Update: Exchanges enroll 7.5 million, but how many have signed up directly with insurers?

HHS Secretary Kathleen Sebelius said Thursday that 7.5 million people have signed up for coverage through the state and federal exchanges since Oct. 1. This latest tally still fails to reflect how many consumers have yet to pay—and the potentially large number who sought coverage outside the exchanges.

The new figure from HHS is well beyond the Congressional Budget Office's original projection of 7 million enrollments and is expected to continue to grow as individuals who started applications before the March 31 deadline complete the enrollment process.

But like all Obamacare numbers, the tally doesn't tell the whole story. As widely noted, those figures reflect how many people have completed an application. Not all of them will pay their first premium, which is required before coverage is actually effective. Although no hard numbers are available, insurers have typically estimated that 15% to 20% of applicants won't follow through with payments.

What's garnered less attention is the universe of individuals who bypassed the exchanges and instead enrolled directly with health plans or through insurance brokers. The federal government hasn't released any statistics about how large this universe might be, but it's likely significant.

A study released this week by the RAND Corp. estimated that 7.8 million Americans enrolled in coverage outside of the government-run marketplaces between November and mid-March, and that most but not all of them previously had coverage. J.P. Morgan analysts predicted in a March 27 note to investors (PDF) that the number of off-exchange enrollments would outpace the number of individuals who failed to make premium payments. “We think the net impact of these two opposing factors will ultimately be a boost to the final enrollment tally,” they wrote.

In a letter to the CMS (PDF) earlier this month, America's Health Insurance Plans, the leading industry group, expressed frustration that the option of signing up directly with insurers hasn't been more prominently featured on the HealthCare.gov website. “Currently it is not clear where on the website a consumer would find information about obtaining insurance coverage outside of the exchange or where the Plan Finder is located,” an AHIP official wrote.

Some state regulators and individual health plans have also released data illuminating the universe of individuals signing up for coverage outside of the exchanges:

• Blue Cross and Blue Shield plans signed up 1.7 million individuals outside of the exchanges through February.
• Washington state reported roughly 184,000 off-exchange enrollments through the end of February. That's more than the 146,000 individuals who purchased plans through the state's health exchange through the end of March.
• CoOpportunity Health, a not-for-profit startup insurer operating in Iowa and Nebraska, has signed up 70,000 individuals for commercial plans. Of those, 11,000 didn't come through HealthCare.gov.
• In Rhode Island, the two health plans selling products on the exchange enrolled 29% of their customers outside of the online marketplace.
• PreferredOne, a not-for-profit insurer operating in Minnesota, reports that more than 70% of its 68,000 enrollments since Oct. 1 have come directly through its website, rather than through the state's problem-plagued MNsure marketplace.
• InHealth Mutual, a not-for-profit startup insurer in Ohio, is only selling plans outside of the exchange. That's because the health plan wasn't granted a license by state regulators in time to be listed on the exchange. InHealth Mutual won't release any enrollment data, but claims it has doubled projections.

The bulk of individuals signing up for coverage directly through insurers are anticipated to have been previously insured; RAND put the number at 94%. That's in part because low-income applicants who qualify for federal subsidies have for the most part needed to go through the exchanges in order to access financial assistance.

The consumers enrolling outside the exchanges are also anticipated to be younger and healthier than those signing up through the exchanges. Nearly half of the ones who enrolled through eHealth, an online broker, between January 1 and March 23 were between the ages of 18 and 34—a far higher percentage than those enrolling through the government-run marketplaces.

The off-exchange enrollment has likely been boosted by the technological problems that beset HealthCare.gov and some state websites in the early months of operations. Harvard Pilgrim Health Care says it added 11,000 new individual customers in Maine and New Hampshire for coverage that kicked in at the start of 2014 even though the not-for-profit insurer wasn't participating in the exchanges in those states.

“We were getting inundated with telephone calls from frustrated individuals that believed they were eligible for subsidies but didn't have any reasonable method for getting enrolled,” said Harvard Pilgrim president and CEO Eric Schultz.

Harvard Pilgrim plans to sell products on exchanges in Maine and New Hampshire in 2015. During the recently completed 2014 open enrollment period, the not-for-profit insurer only competed for customers on the exchange in Massachusetts. The New Hampshire expansion is particularly noteworthy, since the state had just one insurer selling products through the government-run marketplace in 2014. Previously, Minuteman Health, a not-for-profit startup insurer announced that it plans to sell products on New Hampshire's exchange during the 2015 open enrollment period. That means there will be at least three insurers competing for customers in the state.

The number of children lacking health insurance was decreasing even before full implementation of the Patient Protection and Affordable Care Act, according to a new study by the Robert Wood Johnson Foundation. In 2012, 7.5% of children lacked coverage, down from 9.7% four years earlier. Every state saw the level of uninsured kids decrease during that time period. Nevada had the highest level of children lacking coverage in 2012, at 17%, while Massachusetts had the lowest rate, 1.4%. The study also found that an increasing percentage of kids were receiving health insurance through government programs. In 2008, 25.8% were covered through public programs; that figure jumped to 33.6% in 2012.

Follow Paul Demko on Twitter: @MHpdemko