Trump’s ad cuts will cost a minimum of 1.1 million Obamacare enrollments

The Trump administration recently announced that they were cutting the outreach and education budget for Obamacare by 90 percent, from $100 million to $10 million. As the person in charge of how that money was spent last year, I decided to crunch the numbers to figure out what that would mean for enrollment this year.

A minimum of 1.1 million fewer people will enroll in the federal exchange solely because of the administration’s drastic cuts to Open Enrollment outreach. Keep in mind, this is the least harm the administration’s outreach cuts could have — this is a best case scenario. It assumes they spend the $10 million they have budgeted well and that nothing else the administration has done will impact enrollment. For example, this estimate doesn’t account for consumer confusion about repeal efforts, the Executive Order or the end of payments of Cost Sharing Reductions.

When it comes to estimating the impact of outreach, I am not pulling a number out of the air. The administration falsely asserted that “they had not done any studies of the efficacy of enrollment advertising”. This is absurd. The Department of Health and Human Services closely measured the impact of outreach during previous Open Enrollments so we have a clear understanding of how effective advertising is at driving enrollment. Internal HHS reports, written about by the Huffington Post, documented a two-year study of the causal relationship between outreach and enrollment.

Surprise: advertising works!

But the research tells us more than just the fact that it worked. It tells us what worked and how many enrollments were generated per dollar spent.The HHS study shows that television, radio, digital ads, search advertising, emails, phone calls, mobile ads, direct mail, and more drive enrollment. It’s also part of the reason HealthCare.gov had its biggest day of enrollment ever last year.

Using the research, we can roughly quantify how enrollment will be impacted this year. I did this once before, when the Trump administration cut outreach during the final week of Open Enrollment in January 2017. Before those cuts took effect, I said that decision would likely cost 500,000 people coverage — and looking at the final enrollment numbers, that seems pretty close. Nearly 500,000 fewer people enrolled at the end of January compared to the equivalent time period the previous year and in my post I highlighted why enrollment at least had the potential to be even higher than the previous year. This blue and red in this ACASignUps.net graph show just how different the final week of January was compared to the previous year.

The threat to Open Enrollment this year is very real. People will be hurt by the administration’s actions. But we aren’t powerless either.

Lori Lodes and I founded Get America Covered, because we recognized that the administration intended to do so little — they’d set the bar so low — that a committed group of people could make a big difference. The same energy that stopped repeal efforts has the potential to change the course of Open Enrollment. Together, we can Get America Covered.

Want to help? Find out how!

If you’re interested, I walk through how I arrived at the 1.1 million enrollments below.

Methodology

Assumptions

This time, given the severity of the cuts to advertising and outreach and the sheer number of things that are changing I’m working off a few assumptions.These assumptions underscore why this estimate is a best case scenario and that it likely underestimates the impact of outreach cuts on enrollment. Here’s what I’m assuming:

1. Other changes to Open Enrollment and the ACA will not negatively impact enrollment.
2. No change to the underlying uninsured population. New Gallup data suggest this may not be true, but factoring this into the analysis would be significantly more complicated.
3. HHS selects the most efficient outreach tactics they can afford during Open Enrollment. While still theoretically possible, it’s unlikely.
4. HHS uses best practices when they conduct outreach. With years of testing, we know what’s helpful to get people enrolled and what’s not. There is virtually no chance HHS will use best practices. For example, the administration stopped mentioning the penalty for not having coverage in virtually all consumer communication last year days after they they took over.
5. The administration is retaining customers at the same rate we did. While likely not true, I assume this administration has been working just as hard to keep current consumers happy between open enrollments and enrolling new customers at the same rate.

Hypothetical Marketing Plan

I created a hypothetical marketing plan for HHS — this is the simple version of the plan I’d write if I had a budget of $10 million to do outreach — it’s a best case scenario for outreach this year.

If I was asked to cut my $100 million budget to $10 million, we’d start with some painful triage. I would eliminate all tactics that aren’t 100% proven to drive enrollment. While that might seem like a good idea, this is extremely short-term thinking when you are responsible for a program of this size. You have to try new things (even if that means sometimes failing), because consumers and technology change every year. If you stop learning long enough, you increase your risk of running a program that loses efficiency and effectiveness each year.

In past years, four tactics drove the vast majority of enrollment: Email, Phone Calls, National TV Ads, and Search Advertising. For simplicity’s sake, I am going to focus on these four tactics though there are a few others that drive smaller enrollment numbers, and would be relevant to the actual plan.

Before we enroll anyone, we take $1 million off the top to pay for overhead (writing, graphic design, production, meeting regulatory requirements for data we work with, etc). Next, I’d optimize funding for the most cost-effective tactics.

1. Reminder Emails and Calls: Together, email and phones are the most cost effective form of outreach responsible for roughly 30% of outreach driven new enrollments and 45% of outreach driven active renewals directly attributable to outreach. Given their efficiency and importance, I’d do everything I could to support this outreach. Unfortunately, Open Enrollment is half the length compared to last year. While this doesn’t change the costs, it does reduce the impact via these channels. Where we could prioritize re-enrollment last year, the same limited resources (e.g. phone calls to customers per day) would split our new vs returning consumer efforts. I’d still be forced to trim back some of the budget from the previous year with the hope that year-over-year improvements might allow me to achieve similar performance. I’d also need to cut parts of the phone program that are more labor intensive for our call center team since they won’t have the bandwidth to help additional customers given the condensed enrollment period that will drive much higher call center volume.
2. TV Ads: National TV was responsible for nearly 40% of enrollments directly attributable to outreach — more than any other single tactic. CMS already announced that they won’t buy any national TV (they can’t possibly afford to). As you can imagine, TV is one of the best ways to reach people who are not currently Marketplace consumers. Data from last year also show that TV nudged current consumers to actively renew their plans — lowering their premiums and increasing retention. TV increases the effectiveness of almost every other tactic. As you can imagine, people who see a TV ad are more likely to do a Google Search for “Obamacare”, then see a HealthCare.gov ad and\or sign-up for the HealthCare.gov email list.
3. Search Advertising: Search Advertising alone was responsible for 25% of outreach driven new enrollments and 8% of active renewals. For simplicity sake, I’m going to put all of what’s left into search advertising — those ads that popup when you search for “health insurance”. The more complex plan would split this among other digital ads too — but the bulk would be in search. Unfortunately, all of what’s left (6 million) is only 25% of last year’s Search Advertising budget (the digital budget was even larger).

And just in case it’s not obvious, even though email and phones were our most cost effective forms of outreach, we can’t just increase these budgets. Unlike TV and Search Advertising, adding money to Email and Phones has very limited impact on its ability to increase enrollment. For the most part, we’re paying for infrastructure, not outreach. Sending email and making calls costs very little, but both tactics are dependent on people coming to HealthCare.gov and signing up. What’s worse is that the two of channels that make people most likely to sign-up to receive emails and phone calls are TV ads and Search Ads, both of which face severe cuts this year.

Hypothetical Budget

This budget is in sync with what HHS has publically announced (no TV or Radio instead they will use digital ads and continue to send email and text messages).

From Budget to Enrollments

From here, I use the measured impact of outreach by channel (E.g. TV, email, etc) last year and apply it to the available budget. I eliminate new enrollments and active renewals generated by TV and cut the impact of search advertising to 25%. For email and phones, I need to make two additional assumptions, how many fewer new and returning enrollees will enroll because:

1. Either they never sign up for the email\phone lists because they never saw a TV or digital ad and
2. How many fewer will enroll as a result of fewer outreach touches given halved Open Enrollment Period.

For returning consumers, my assumption is that email and phones will be 85% as effective at getting consumer to renew their coverage — most of that reduction is attributed to the limits to the phone program. For new consumers, I’m assuming that email and phones will be 60% as effective as last year. This is a bigger reduction, but without TV and the bulk of the digital ad budget, there will be far fewer people receiving emails or phone calls this year. On top of that, the team will have half the time to communicate within this shortened enrollment period. This is likely a conservative estimate.

For the purpose of this exercise, I assume that everything else remains constant. What I get is a ballpark estimate of the expected impact of outreach for OE5.

Factors that are NOT included in this analysis

As a reminder, this analysis doesn’t account for the impacts to Open Enrollment from the following (to name a few):

1. Consumer confusion due to repeal efforts, the Executive Order and the end of payments of Cost Sharing Reduction.
2. Potential efforts to undermine the effectiveness of outreach during OE this includes:
   a. Tactics: Not making smart decisions about how to spend the $10 million budget.
   b. Language: Not using tested language about how much coverage costs, what the penalty is or, for this year, highlighting that Open Enrollment is shorter and that the final deadline is on a new date entirely.
   c. Personalization: Not using personalized outreach that speaks to an individual consumer’s situation (e.g. if you don’t shop, your premium will increase 30%).
   d. Frequency: Not following best practices established through testing on when and how often to remind consumers by email, phone, etc.
3. Confusion over when to sign up because of the new final deadline.
4. Shortened enrollment period.
5. 41% cut to the in-person assistance navigator budget.
6. Higher traffic due to a single enrollment deadline this year will create long customer wait times at the call center and website and prevent frustrated consumers from enrolling.
7. Lack of national and local media engagement by the administration before and during Open Enrollment.
8. Not continuing to engage with businesses, libraries, state officials or other partners
9. Administration focus on falsely accusing the marketplaces of failing or imploding or making misleading statements about “soaring” premiums.
10. HHS refusing to allow regional directors to help with state enrollment efforts.
11. HHS actually using ACA funding to create and promote negative ads against the law.
12. Departed HHS and CMS staff who work on the ACA not being replaced.
13. Less federal outreach that indirectly supports State Based Marketplaces or Medicaid (e.g. National TV).
14. Lack of Special Enrollment Period email outreach and more arduous SEP verification steps for consumers mean fewer enrollees on November 1st.

It’s pretty obvious that all of these will collectively hurt enrollment — together they may cause an even greater synergistic harm— it’s only a question of how badly?

Results

In the best case scenario, where the most well-intended administration imaginable spent the $10 million dollars in the most efficient way possible, we’d expect to see just shy of 1 million fewer new enrollments in the federal marketplace during the upcoming enrollment period.

In addition to this, we’d see just over a million fewer active renewals in the federal marketplace. Active renewals matter a lot. Consumers who do not actively renew typically pay higher prices than those who do. It’s not a surprise that they are far less likely to keep their marketplace coverage. Based on past behavior, we can expect an additional 200k consumers leave the Marketplace within 12 weeks of the end of Open Enrollment, because they did not actively renew.

Best Case Scenario: Only 1.1 million enrollments lost.

One other factor to keep in mind: The lost enrollments are likely to be disproportionately healthy people. In past years, we’ve seen that younger consumers and presumably healthier consumers are more likely to respond to outreach. As you can probably imagine, a patient with a chronic condition is typically more highly motivated to enroll. Without outreach, the marketplace will effectively lose 1.1 million of its healthier people.

Covered California’s has outspent the Federal government on marketing for many years. They put out an analysis earlier this year, Marketing Matters: Lessons from California to Promote Stability, where they recommend that the federal government increase its marketing spend over last year substantially. They also note that 1 million fewer enrollments due to a decreased marketing spend is “likely a conservative estimate.”