It appears that Obamacare is delivering surprising benefits to health insurers. While some worried about the possibility of losing money, especially in the first year of providing benefits, some of the largest health plans are firmly committed to the program.
According to Forbes, the fourth-quarter earnings reported this week by these large health insurers indicate that they can indeed handle the first year of potential risk from new participants who are using the government exchanges to buy subsidized plans.
Under the law, uninsured Americans have until March 31 to avoid paying a penalty by getting enrolled in a plan. Millions are eligible for subsidies up to $5,000 to reduce premiums and a broad range of health plans offers something for everyone.
Last Friday, David Cordani, Cigna’s chief executive officer, said that the newly enrolled participants were slightly older compared to the general population. Humana, on the other hand, reported earlier that more younger people are enrolling as the deadline approaches.
Humana provided the most detailed information about its enrollment growth from the exchanges and indicated that the younger people the industry needs to get signed up are beginning to enroll.
Bruce Broussard, head of Humana, told analysts that younger enrollees who are receiving premium subsidies are choosing plans with lower deductibles and higher metal tier. He believes that the nearly 82 percent of enrollees receiving subsidies will offset some of the possible losses associated with a deteriorating risk pool from the higher membership in non-Obamacare plans.
It was Mark Bertolini, chairman, president, and chief executive officer of Aetna, who listed the Obamacare benefits after his company reported profits that were nearly double those for the same period last year. Calling the revenue opportunities unprecedented, Bertolini mentioned (among other factors) the growth in Medicare Advantage as 11,000 baby boomers a day, age into the Medicare program. Growth in public exchanges that could reach 25 million members by 2020, and Medicaid expansion where 15 million more will become eligible under the Affordable Care Act.
Overall, Obamacare is delivering benefits to health insurers that provide more than enough revenue opportunities. None of these industry leaders seem to be planning to bail out of the program. These leaders, according to Forbes, expect to begin to recover their implementation costs by next year and maybe even sooner.
Now, Sen. Marco Rubio (R-Fla.) has introduced legislation that would repeal an Obamacare provision that protects insurance companies from potential unexpected changes in marketplace composition.
The provision creates “risk corridors” that provide a safety net for insurers during the first three years of the program’s implementation. The idea is to protect the whole marketplace if more of the expensive patients sign up than anticipated. Insurance companies estimate their costs in advance. In the end, if costs are higher, the government pays part to the extra costs, but if costs are lower, the insurance companies pay the government.
Rubio is referring to his bill the as the Obamacare Bailout Prevention Act and it would eliminate these risk corridors.
Writing as a guest columnist for the Shreveport Times (January 16, 2014), Mark Reitz, president and CEO Blue Cross and Blue Shield of Louisiana in Baton Rouge, says labeling this provision a bailout is misleading. Rather, he describes it as “… a two-way street designed to also help the government ensure the success of the ACA and keep costs down for consumers.”
Without the safety net, he says, consumers could see premium rates increase as much as 10 to 15 percent. Moreover, he warns that “…eliminating these safety net programs won’t just lead to the failure of the ACA. There is a good chance it will also jeopardize the entire private health insurance market and ultimately lead to a single-payer system, more government control, less choice and higher taxes.”
Reitz concludes his article by predicting a long, and bumpy ride ahead. For the time being, Obamacare is delivering some surprising benefits to the health insurers. Going forward, the question may be whether some of those benefits are a necessary safety net or a bailout.
by Sharon I. Fawley