What does the Detroit Auto Show have in common with ObamaCare?


One of the things about new car sales is that there are several “bumps” in month-on-month sales figures.  The first is in March when people get tax refunds, the second is in the late summer when the new models are released, and the third comes at Christmastime.*  In contrast, consumer interest in   used   cars, auto financing, tires, etc. follows a   very different   pattern.  Specifically, interest in used cars and auto financing is very low during the holidays and appears to take off as soon as tax refunds start to roll out.**   


Here’s the key point: The ACA consumer isn’t looking to buy insurance during the holidays for the same reason they don’t buy new tires or a used car then.  They can’t afford it at that time of year.  Instead, they will wait for their tax refund before they take on new financial obligations.  So the key to enrollment success among low and middle income Americans is to offer products when those consumers have the cash to purchase what is for sale.  


This year, that’s easy. The ACA’s open enrollment continues through March 31st, giving the ACA consumer ample time to connect their refund and a new insurance policy.  The real problem is with the next open enrollment period for 2015: it is slated to end before tax refunds begin.  The Feds are expected to make the final decision soon, but this decision now largely dictates whether or not they will be able to enroll the roughly 13 million Americans that the CBO estimated would buy health insurance on the new marketplaces by the end of the next sign-up period.*** 


Even with hefty tax credits, does it make sense to sell health insurance precisely when uninsured consumers don’t have the cash to buy it?  Maybe not.  And maybe that’s exactly what HHS can learn from used auto sales.  The automobiles appearing at this North American International Auto Show will show up as used cars soon enough.  And the marketers for those same used cars next year may have insight from which HHS might benefit now: it’s all about timing and taxes!


For friends in the media, all statements are on the record.  Please feel free to contact me atbrian.haile@jtax.com or 615-761-6929 if I can be helpful in any way.  






* See, e.g., http://www.edmunds.com/industry-center/data/sales.html and http://www.icis.com/blogs/chemicals-and-the-economy/2013/10/us-auto-market-driven-by-used-car-sales-trends/ accessed January 13, 2014. 


** See, e.g., http://www.google.com/trends/explore#q=used%20cars&geo=US&cmpt=geo  andhttps://www.google.com/finance?q=GOOGLEINDEX_US%3AAUTOFI&ei=1gfUUriZKcOVsgfMLw accessed January 13, 2014.


*** CBO's May 2013 Estimate of the Effects of the Affordable Care Act on Health Insurance Coverage, available athttp://www.cbo.gov/sites/default/files/cbofiles/attachments/44190_EffectsAffordableCareActHealthInsuranceCoverage_2.pdf, accessed January 13, 2014.