Get the Facts on Who Signed Up For Health Insurance Outside of the Health Insurance Marketplace

Between 15-25 million enrolled outside of the marketplace in 2014. Let’s take a look at enrollment numbers outside of ObamaCare’s marketplace.

In 2013 over 15 million people enrolled in private health plans. In 2014 about 4.7 million were estimated to have lost their plans due to the ACA and new insurance options including the marketplace and expanded Medicaid gave consumers more choices for health insurance. 2014 also meant increased awareness of insurance due to the ACA and a requirement for most folks to have health insurance. Below we take a look at factors that caused an over-all rise in health insurance sign ups and how this affected private health insurance enrollments outside of ObamaCare’s marketplace.

Enrollment Numbers Outside the Marketplace

by Paul Mullen

Looking only at enrollment through the exchanges ignores the much larger number covered by existing plans or by new individual qualified health plans bought outside the exchange. In 2013 about 15 million people were covered by these plans, although estimates vary according to the source and definition used. In particular 3.5 million individuals purchased plans through associations, which are counted by the National Association of Insurance Commissioners as Group Plans.

Before the ACA purchasing an individual health plan was often difficult, for these plans varied greatly in coverage (some even omitted all hospital care) and in most states insurers could deny coverage, decline to cover pre-existing conditions, or raise premiums for anyone with previous health problems. Even after you got a plan, the insurer could raise your premium each year until it became unaffordable. Premiums change because of age (typically a 400% increase between your twenties and sixties, which is 3% to 5% increase each year), health cost increases (which have averaged 6% a year) and anything else the insurer wants to add. The way they do this is to offer a cheaper plan to the healthier people who bought your plan, and then raise premiums for all the remaining (unhealthy) members of that particular plan. Despite the President’s promise that “if you liked your plan you could keep it”, most individual health plans changed each year, and so did not qualify for grandfathered status. Even if you could keep it, your 2014 premium was likely to be between 16% and 30% higher than in 2013 quite apart from any effect of the ACA!

In any case, many people move into or out of individual plans each year. A recent analysis by Dr Benjamin Sommers at Harvard University found that …

Of the 15 million, many were intended as short-term cover when people lose employer coverage, early retirees waiting for Medicare, or with a waiting period before a new employer policy starts. Other individual plans which were in effect before 2010 without significant changes are “grandfathered” – that is they can continue indefinitely, even though they do not meet all the new requirements, and may not cover all essential health benefits. However the individual insurance market is a very fragmented one and companies are constantly changing their plans, so most plans have been deemed non-compliant and under the original rules had to be discontinued at the end of 2013 (or at their next renewal date if different). This resulted in an estimated 6 million plans for which cancellation notices were going to be sent out because they did not offer the ACA minimum essential cover.

Prior to ACA thee were around 15 million individual plans, about half grossly inadequate (known as “Limited Benefit”, “Indemnity” or “Mini-Meds” that did not cover hospital care or which had an annual limit on benefits of as low as $2,000 a year), and almost all non-compliant in one way of another. Many had plan years ending 31st December but were offered “early extensions” in states which permitted them. Others were offered by insurers which had decided to withdraw from certain markets. Then the President decided to allow extensions but only if the State permitted it. States like CA or WA did not allow either, so we can expect almost all their previously individual plans to either get Medicaid, enroll on the exchange, or enroll off-exchange, with just a tiny portion (less than 3%) deciding it was too expensive and choosing to remain uninsured.

So far the most comprehensive numbers for total cancellations comes from an Associated Press report. Their total of 4.7 million cancellations has been widely reported. However when you look at it you see that this is only for states which had collected data on cancellations. Twenty states, including big states like Texas, were omitted! If you compare cancellations with the KFF estimated number of individual plans by state, you see that the 4.7 million total was for states with only 11 million out of a total 15.8 million plans. Assuming the remaining 4.7 million plans had the same average 30% cancellation rate adds another 1.4 million cancelled, bringing it to 6.1 million! Furthermore the percentage of reported cancellations vary wildly by state from less than 1% in Mississippi and Idaho to over 90% in Washington and Idaho.

While some variations in estimated number of individual plans by states may be due to sampling variation and other inaccuracies in the CPS survey, or to changes between 2011 and late 2013, it is clear that some states interpreted this to include all plans that potentially could be cancelled, while others only gave the number of cancellation notices actually sent out. One or two states, such as Kentucky, even listed all plans in effect, even where the insurers had not given them notice! Some added in cancellations which were expected during 2014 as well as policies cancelled up to the end of 2013. The numbers suggest that some states did not include plans which were given the option of either early renewal or cancellation, while others (like Washington or Colorado) did.

In Colorado the State insurance Commissioner reports that out of 335,500 people sent cancellation notices, 308,840 (92%) were offered early renewal. The ten states with the lowest cancellation rates reported only 18% of the estimated plans in those states were cancelled, while the ten states reporting the highest cancellation rates report that 76% were cancelled! This may be related to policy end dates – in some states policies all end on December 31st but in others they renew throughout the year.

If you are trying to explain either exchange enrollment or QHPs sold “Off-exchange” you need to make special allowance for the states which refused to allow or restricted early renewals (CA, MA, MO, NY, OR, RI, VT and WA) as well as those that banned extensions. States on both lists will still have some grandfathered plans but far less than half of plans at 2010 are likely to be grandfathered.

Ultimately less than 500,000 plans were cancelled. First in most states the insurers offered early renewals, changing the plan year to start on December 1st 2013 instead of January 1st 2014, and so avoiding the ACA changes for 11 months. For example the Colorado Insurance Commissioner has reported that in Colorado out of 335,500 people sent cancellation notices, 308,840 (92%) were offered early renewal, enabling the plan to continue until a renewal date late in 2014. Not all states allowed this: States known to have banned or restricted early renewals include CA, MA, MO, NY, OR, RI, VT and WA. Ultimately insurers have reported that nationwide about a third of policyholders took up the option to renew early, the others presumably having found better choices.

Then, as concern over the cancellations mounted, the President allowed a one year extension for these plans, provided that both the insurer and state allowed it. Not every insurer wanted to extend the plans: some smaller companies had decided it was time to get out of the health insurance business, and apart from those, almost every cancellation notice also offered a choice of other alternative plans, which may have been more profitable for the insurer. Many States were concerned that extensions would enable insurers to “skim off” younger healthier people, so leaving less healthy people in the exchange plans. The following states do not allow extensions or restricted them to only 3 months: AK, CA, CT, IN, MA, MD, MN, NY, NE, OK, RI, UT, VT, WA, WI, WV.

Unless you have been allowed to extend an old plan, all individual plans now have to offer all ten essential health benefits, cover at least 60% of healthcare costs, have no annual or lifetime maximum limits on the amount they will cover, and be designed to meet one of the five “metal” levels, Bronze, Silver, Gold, Platinum, or Catastrophic. These are known as “Qualified Health Plans” (QHP).

All Individual, family and small business plans sold on the exchanges can also be bought outside the exchange (except in DC) at exactly the same prices and conditions. The only difference is that you can only qualify for premium subsidy if you buy through the exchange.  In most states there are many additional qualified health plans which were not sold on the exchanges. For example in South Carolina ten companies sell off the exchange but only four of these sold plans on the exchange.

For policies sold on the exchange, evidence so far indicates that between 40% and 120% more people bought similar policies outside the exchange (to put this another way between 30% and 55% of all new individual QHP purchasers bought their plans outside the exchange). The proportion is higher in states where the exchange did not work well, and in Republican leaning states where many preferred to “avoid ObamaCare” and buy policies from a private insurer instead. It does not matter though where you buy your policy – all new health insurance policies comply with the same rules as the exchange “ObamaCare” plans have to comply with, and plans, whether bought on and off the exchange, form part of the same “risk pool” and have the same premiums. In addition many more bought plans from companies that are not participating in the exchange in their area.

The replacement ACA compliant policies are much more expensive but this is mainly because many of the cancelled policies had big limitations on coverage: some excluded broad categories of care, such as mental health or maternity, while others limited annual or lifetime cover, so that if your got seriously ill, your insurance would run out just when you most needed it. many policyholders were not aware of these restrictions until they needed the cover.

The distribution of premiums was also affected by new rules. Previously in most states a 64 year old could be charged five times as much as a 21 year old, and women could be charged much more than men. Now men and women of the same age pay the same, and a 64 year old cannot be charged more than three times as much as a 21 year old. This has meant lower premiums for the older age groups, and for women but higher premiums for young males. In most employer plans every employee pays the same premium regardless of age or sex.

At the moment we just don’t know how many people kept their old plan and how many had to buy a new one. Despite the cost increases, it appears that less than 500,000 people who had individual insurance in 2013 are going without in 2014. These have been outweighed by a big net increase in individual plans (though in some states buyers have switched to buying through a State marketplace).

At present data on numbers is limited. We depend on numbers direct from insurers or from state insurance commissioners. Some states, such as Washington, have announced that more plans were sold off exchange than on it. In others it appears smaller but perhaps this is because we do not have complete data on companies that sell individual plans off the exchange but which chose not to participate in the exchange in 2014. United HealthCare, the USA’s biggest health insurance provider, chose to participate in only five states, and in the biggest of these New York, its market share was decimated – down from 20% of the individual market to just 2% of exchange sales. Yet United managed to increase the number of individuals covered! Other companies such as Humana, made a big commitment to the exchanges and almost doubled their individual membership.

In 2014 somewhere between 15 million and 25 million people enrolled in non-marketplace private health plans, in part due to the mandate and in part due to increased awareness under the ACA.

Non ObamaCare Enrollment Number Resources:

We suggest checking official releases from HHS, the CBO, the US census, and popular polls like Gallup for the most current sign-up information (we used all of these sources in our breakdown). Another great resource is which provides pretty detailed and unbiased looks at sign up numbers as well.

1. Insurance Cancellations In Context: Stability Of Coverage In The Nongroup Market Prior To Health Reform. B. J. Sommers, HealthAffairs April 2014

Enrollments and Sign Ups Outside the Marketplace

Above you have both a quick and detailed breakdown of enrollment numbers outside the marketplace under the Affordable Care Act. Please continue to explore this section for more detail on things like general enrollment, marketplace enrollments, employer enrollments, and enrollments of young adults. We will continue to update this section as new sign-up and enrollment data is released.
Understanding Non-Marketplace Signups and Enrollment Numbers