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Young adults flock to Web broker; Obamacare exchanges, not so much

With Obamacare's enrollment deadline just days away, publicly run health exchanges still lag far behind their targets for enrolling young adults, but a leading online insurance broker is excelling at signing up "young invincibles."

The broker, eHealth, said 45 percent of customers who purchased Affordable Care Act-compliant plans from Jan. 1 to March 23 were between ages 18 years old and 34. That's up from 39 percent of shoppers on the company's site, ehealthinsurance.com, from Oct. 1 to Dec. 31.

To see what an achievement this is, consider this: Young adults comprise just 25 percent of cumulative government-run exchange enrollments to date. There has been a slight uptick in that age group's share of sign-ups in each of the past several months, with the rate rising to 27 percent in both January and February.

"Young people are used to doing everything online and naturally gravitate towards something that's easy and quick," said Gary Lauer, CEO of eHealth. "They don't want to pick up the phone, they don't want to do paper applications."

Wendy Gonzalez sits with an insurance agent in Miami as she purchases a health insurance policy under the Affordable Care Act on March 20, 2014.
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Wendy Gonzalez sits with an insurance agent in Miami as she purchases a health insurance policy under the Affordable Care Act on March 20, 2014.

EHealth did not disclose total enrollment tallies, making it impossible to compare with government exchange information. More than 5 million people have enrolled in Obamacare plans via public exchanges, officials said last week. Other web brokers, including GoHealth and GetInsured, have not broken out demographic data for enrollments this year.

Before the Oct. 1 launch of the exchanges, government officials had wanted upward of 40 percent of enrollments to come from young adults. That's because those people are on average healthier than older enrollees, and less apt to use health benefits from the insurance plans. Insurers fear that if not enough young adults enroll in a plan, Obamacare will descend into a "death spiral," where older, sicker customers will use benefits exceeding the premiums paid by all customers.

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Because of such fears, the Obama administration has been engaged in an aggressive marketing effort in recent weeks to get more young adults to buy insurance before Monday's enrollment deadline. As part of that push, Health and Human Services Secretary Kathleen Sebelius visited Montclair State University in New Jersey on Monday to encourage young people to use an enrollment assistance center open on the campus every day until the close of enrollment.

Brian Mast, an eHealth spokesman, said "we don't have any conclusive evidence" why the Web-based broker has outpaced government exchanges when it comes to young adults.

But Mast said the company has a "very streamlined, user-friendly online shopping experience." He also noted that young adults have long been a big part of eHealth's customer base. Last year, before the launch of Obamacare plans, more than 50 percent of eHealth customers were young adults.

The company has since has seen an increase in the percentage of 55- to 64-year-old customers, which Mast said could be the result of those customers no longer being barred from or priced out of many private individual insurance plans because of pre-existing medical conditions. Obamacare prohibits insurers from discriminating against people with pre-existing conditions.

Paul Keckley, a managing director at the consulting company Navigant, said, "I'm not surprised by eHealth's success" with young adults.

"This is not a new rodeo for these folks," said Keckley, noting eHealth's experience marketing their product, and ensuring its website shows up high in online searches for health insurance. "The fact that the state and federal exchanges are having problems connecting is what should be disappointing us."

But, he added, the rate of young adults signing up at eHealth is "incredibly good news to supporters of the Affordable Care Act" because it exceeds the rate the government estimated would be necessary to have stable risk pools for insurers.

Sebelius, during her New Jersey appearance, was asked by CNBC about why there was disparity between the young adult enrollment on the government exchanges and on eHealth's site.

She suggested that just because young adults are going to web brokers, "it doesn't necessarily mean that people are signing up outside the market." She also noted that if a young person earned too much money to qualify for government subsidies to buy insurance, they are not obligated to use public Obamacare exchanges to purchase their plans.

Sebelius' spokeswoman Joanne Peters later added, "As with any product, consumers shop in different ways for health insurance, and we have factored this into the health insurance marketplace."

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"Consumers have multiple ways to apply—whether it is through contacting the call center, receiving in-person help, applying online, or direct enrollment through an issuer or web broker—the marketplace offers consumers access to coverage options in the marketplace most comfortable for them," Peters said. "By strengthening the multiple channels to enroll in quality, affordable coverage through the marketplace, we are offering Americans more options to purchase new coverage."

Some of the plans sold via eHealth, and other web-based brokers, are the same plans being sold on the government-run exchanges. People who buy such plans via the brokers are joining the same risk pool as the people who buy those plans via the public exchanges, and that's what matters in figuring out prices for premiums in future years.

Sara Collins, an analyst with the Commonwealth Fund, said she anticipates a spike in young adult enrollment on the government exchanges before the deadline, as was seen after Massachusetts' "Romneycare" health marketplace launched.

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From the standpoint of insurers, it doesn't matter whether customers enroll via the government exchanges or the web brokers; what matters is the overall average health of enrollees, according to Collins.

"I think it's going to take a little bit of time just to assess the enrollment both inside and outside the exchanges," Collins said.

In other data released Tuesday, eHealth said that since Jan. 1, 51 percent of its new customers identified themselves as previously uninsured.

The government-run exchanges do not have data on what percentage of enrollees previously did not have health insurance. But a recent McKinsey survey found that in February about 27 percent of people who had selected insurance plans from either the government exchanges or other sources had unidentified themselves as previously uninsured.

EHealth said its price index, which tracks the costs of plans sold on its website, shows both the trend toward younger buyers, and less costly plans. As of March 19, the average premiums for individual plans selected by eHealth shoppers was $265 per month, an 8 percent decrease from the average premium of $290 per month for such plans as of Jan. 1. The average age of a shopper had dropped to 36 years old from 39 over the same time period.

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The average cost of a family plan sold by eHealth by March 19 was $665 per month, a 4 percent drop from the average premium for a family plan as of Jan. 1.

So-called bronze plans, which are among the cheapest Obamacare plans and cover a lower percentage of benefits than pricier tiers, were the most popular plans on eHealth, with 42 percent of shoppers picking the option, the company said.

In contrast, more expensive "silver" plans are the most popular option on the government exchanges, a fact that eHealth spokesman Mast said is a function of the fact that government subsidies available for exchange plans effectively encourage people to choose the option.

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