Health care in 2014: Obamacare Enrollment Will Fall Short
The roll out of Obamacare will continue to dominate the headlines in health care and most likely politics in 2014, in what will be the first year of full implementation of President Barack Obama's signature legislation.
Obamacare enrollment will fall short
The lingering effects of the troubled rollout of HealthCare.gov may result in enrollment on the exchanges falling short of the Congressional Budget Office's estimate of 7 million people for 2014. Because some of those problems will stretch into the New Year, I think we'll see 4 million to 5 million people signing on for exchange insurance plans by the end of the open enrollment period in March.
January marks another big deadline for the federal health exchange. That's when the Centers for Medicare and Medicaid Services (CMS) must complete the critical financial management system. That's the back-end part of the site that reconciles enrollment numbers and subsidy payments for premiums to the insurance carriers.
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Well into December, CMS continued to deflect questions about whether the back-end of the system will be ready in time to process those payments.
Affordability could also impact total enrollment numbers. Health care providers worry that low-income patients who sign up may have trouble maintaining their payments, and could lose their coverage during the year.
"In our view, there is no question that premium rates are going to rise by a lot more in 2014 than we've seen this year."
Uncertainty will dog insurers
One of the key questions for insurers in 2014 is whether they managed to price Obamacare exchange plans correctly. Some of the lowest-priced plans will yield low margins and could prove unprofitable if the newly insured wind up using more health services than expected.
The critical issue to watch is whether young, healthy people wind up enrolling to help offset the anticipated demand from older, sicker enrollees.
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But the open enrollment season runs through the first quarter of 2014, so insurers may not have much information on medical cost trends for the new plans until well into the second half of the year. And that's when they have to begin pricing plans for 2015.
Carl McDonald, a senior analyst at Citi Investment Research, expects that insurers will raise rates, but because of Obamacare fees and taxes, they won't see higher profits.
"In our view, there is no question that premium rates are going to rise by a lot more in 2014 than we've seen this year," McDonald wrote in a note to clients. "However, the increased premiums most likely won't translate to margin upside, because the costs incurred by health plans are also going to rise substantially next year."
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Hospitals will see gains
Hospital stocks have been big gainers since the 2010 passage of the Affordable Care Act, as investors have anticipated that the full rollout of Obamacare will result in higher admissions of patients with insurance coverage.
Beyond health reform measures, a bigger boost for hospitals in 2014 could come from improvement in the economy.
With unemployment hitting a five-year low, Americans with employer coverage will gain more confidence about holding onto their jobs and may begin to schedule long-delayed surgical procedures. Those patients may prove more profitable for hospitals, because commercial insurance plans tend to pay higher rates.
—By CNBC's Bertha Coombs. Follow her on Twitter