Obamacare rollout-rescue model seen in Romney’s Massachusetts

(Bloomberg) -- The flaws plaguing the rollout of President Barack Obama’s health insurance exchanges may matter the least to those the president needs the most.

If enrollment in the online marketplaces repeats the pattern set in the Massachusetts exchange that was the model for Obamacare, the young people vital to the plan’s financial stability are paying little attention to the federal website’s mishaps as they wait for the March 31 deadline to sign up.

When Massachusetts started its health-insurance exchange in 2007, younger and healthier people were the most likely to procrastinate until the final weeks to obtain coverage. By November of that year, the last month to sign up to avoid a penalty, the portion of enrollees age 35 or younger had more than doubled to 36%from February, one analysis shows.

“The young and healthy are going to be the last to enroll,” says Michael Perry, a partner at PerryUndem Research, which has done market analysis for Planned Parenthood and the Robert Wood Johnson Foundation on the new exchanges. “Who knows, in February, when they’ll probably start getting around to this, or March, what the story will be?”

Critics of Obamacare, such as Douglas Holtz-Eakin, the chief economic adviser to 2008 Republican presidential nominee John McCain, question the comparison with Massachusetts, saying a relatively small portion of the state’s population lacked insurance at the time, and the law was less politically charged.

Enrolling those under 35 has been the focus of the Obama administration’s strategy on the online exchanges all year long. Buy-in from the young is essential to establishing a sound actuarial pool and keeping premiums affordable because the law bans discrimination against people with pre-existing conditions; otherwise those with chronic health problems could swamp the system and send rates soaring.

The program’s rocky start was underscored last week when the government said that in the first month of enrollment about 106,000 people signed up for private insurance through Obamacare -- including only 26,794 for private plans through the federal website. The government had an early target of 800,000 sign-ups for the first two months, though it scaled back expectations as the online exchange was beset with software flaws.

The White House anticipates Obamacare enrollment patterns will follow the same trajectory as Massachusetts, says David Simas, a deputy senior adviser to Obama who works on health policy. “The Massachusetts experience, both in terms of the initial levels of low enrollment as well as later engagement by younger folks, is the best road map,” Simas says.

In Massachusetts, healthy people of all ages waited longer to enroll than those with chronic medical conditions, according to the analysis of monthly applications by professors Amitabh Chandra of Harvard, Jonathan Gruber of the Massachusetts Institute of Technology and Robin McKnight of Wellesley College.

The portion of enrollees without chronic conditions rose from 64% in the first half of 2007 to 70% during the next five months and 76% in the months following the mandate’s November deadline, according to a 2011 article by the three professors in The New England Journal of Medicine.

Monthly enrollments by healthy residents peaked at just over 6,000 during December, immediately after the deadline, according to the article.

By 2011, 96% of Massachusetts residents had insurance, compared with 84 percent of the U.S. population, an analysis of census data by the Kaiser Family Foundation shows.

‘Be patient’

“The Massachusetts data teaches us to be patient,” says Gruber, who advised the Obama administration on its health-care plan and was one of the architects of the Massachusetts law passed under then-Republican Gov. Mitt Romney. “The younger, healthier people were more motivated by the have-to than want-to and they came in later.”

Holtz-Eakin sees limits to using the Massachusetts pattern to predict how people will respond to the exchanges under the Affordable Care Act, which has been the target of relentless Republican attacks since Obama signed it into law in March 2010.

In Massachusetts, the startup wasn’t beset with the same technical difficulties, says Holtz-Eakin, now president of the American Action Forum, a policy research group.

And young, healthy people are a “tough crowd” to sell on the immediate value of health insurance, he says. “Any bad news with this group has to concern you. As a going-in proposition, you have to be nervous about them showing up.”

The initial open enrollment period also was longer in Massachusetts. While the Obama health-care plan has a six-month sign-up period for coverage in the first year ending March 31, Massachusetts opened enrollment in stages 15 months ahead of the coverage deadline.

One new wrinkle Obama added last week was his decision to allow private insurers to extend existing individual policies for up to a year even if they don’t comply with the minimum standards required for insurance sold on the federal exchanges.

Karen Ignagni, president of America’s Health Insurance Plans, an industry group, says the last-minute change might have a disproportionate impact on sign-ups by younger and healthier people. Unlike Obamacare plans, those policies can keep premiums lower by excluding people with health problems and covering fewer services.

“If now, fewer younger and healthier people choose to purchase coverage in the exchange, premiums will increase and there will be fewer choices for consumers,” Ignagni says.

Enrollment shortfall

Earlier this year, the White House set a goal of getting 2.7 million 18- to 34-year-olds to sign up for insurance policies through the online exchanges, based on a projection by the Congressional Budget Office of a total enrollment of 7 million people in the first year.

More than a month after the start of healthcare.gov, the federal website that handles insurance sign-ups in 36 states, workers on the front lines in the drive to enroll people say the site remains inconsistent, balky and crash-prone. Jeffrey Zients, the former White House budget chief whom Obama appointed on Oct. 22 to help sort out the website problems, has said the site will work smoothly by the end of November.

Uninsured Americans have until March 31 to purchase policies to avoid penalties under Obamacare and until Dec. 15 to obtain insurance if they wish to begin coverage at the beginning of the year.

If the administration can improve the website’s performance in time, younger consumers will quickly look past the early glitches, says Tim Bajarin, president of San Jose, Calif.- based Creative Strategies who has followed consumer electronics startups for 35 years.

“The stories that there is a hiccup, these guys don’t care,” Bajarin says. “They know technology will get fixed. Their faith in technology is a lot greater than their parents’ generation.”

Apple Inc. broke its quarterly sales record for smartphones in 2010 even after starting the period by acknowledging antenna problems with its iPhone 4 in an episode that Steve Jobs dubbed “Antennagate,” Bajarin says. Microsoft Corp. won a wide following for its Windows 95 and Windows XP operating systems after early flaws, he says.

A tangential impact of the website woes has been a temporary pullback in the Obama administration’s efforts to market the online insurance exchanges, says Dan Mendelson, chief executive officer of the Washington-based consultancy Avalere Health LLC. Because of the priority placed on signing up those younger than 35, the marketing campaign is disproportionately geared toward the young, he says.

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