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What to look for in judging Obamacare's year two

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(Bloomberg View) — Enrollment opened for the second year of the Patient Protection and Affordable Care Act (PPACA) — “Obamacare” — this weekend, and so far we know two things. First, the software works a whole lot better than it did last year. And second, the major markets generally have at least one silver plan that’s not much more expensive than the lowest-cost silver plan from 2014.

This is undoubtedly major progress. What we still don’t know is what people will actually be paying. Coverage has focused on the silver plans, because they’re the benchmark that’s used to set the subsidies. Last year, more than 60 percent of the plans purchased on the exchanges were silver plans. But not these silver plans — many of the old plans are seeing substantial premium hikes.

The cheaper plans tend to be new or expanded offerings from insurers that didn’t do a lot of business on the exchanges last year, even as the insurers who gained a lot of market share in 2014 are charging more.

This is worth reflecting on, because it highlights a bunch of the uncertainties about Obamacare. The market is still very much establishing itself; what’s happening this year doesn’t necessarily tell us all that much about what will happen in 2018.

We’ll gain some information as this open enrollment period closes, of course. For example, how many new people sign up? I can tell a story where the word of mouth from last year’s enrollees is great, and a lot more people hit the market. I can also tell a story where all the people who really wanted to buy insurance but couldn’t find it (or afford it) rushed in to buy in 2014, and next year’s enrollment isn’t much bigger than this year’s. I can’t begin to judge which of these stories is true. Even the anecdotes floating around tend to be produced by activist groups who would like to manufacture a national trend out of 10 hand-selected cases.

Another question: How aggressively will people shop? Will they display a strong tendency to stick with whomever they have, or will they take a flier on an unknown insurer? Obviously, this is going to determine what sort of prices people pay. But it is also going to strongly affect insurance company strategies. If people tend to be “sticky,” then you’re going to see cutthroat below-cost pricing in earlier years, then a shakeout, followed by substantial price hikes as people settle into long-term relationships with their insurance company. If customers tend to shop around aggressively, then offering a policy below cost is financial suicide. So we’ll probably see prices increase substantially next year or 2017 — though overall prices may be lower in the long run than they would be if people show a strong tendency toward automatic renewal.

A third question: How forthcoming will the administration be with data? The pattern during the first open enrollment period was that good data generated immediate whisper numbers, followed by a press release within a few days. Bad numbers were sat on as long as possible. If we hear numbers early, then enrollment is exceeding targets, which suggests that the exchanges are starting to deliver more coverage expansion.

Another thing to keep in mind, however: This open enrollment period isn’t the biggest test for Obamacare in the next 12 months. The biggest test will be what happens on or around April 15th. That’s the first time all the people who didn’t buy insurance will get hit with the individual mandate penalty, and the ones who thought that it was a nominal $95 fee are in for a nasty shock

My best guess is that 8 to 10 million people gained insurance last year, but that a majority of that gain came from Medicaid, not exchange policies. The individual mandate penalty for 2014 is $95 or 1 percent of your income, whichever is higher. Higher income folks who decided to skip insurance this year, be warned.