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Public Health Insurance Companies On The Obamacare Exchanges

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The CBO has projected that by 2016 an additional 22 million people will find some form of health insurance coverage through the Affordable Care Act's Health Insurance Marketplaces. In each state multiple insurers are competing for the opportunity to capture the new consumer base that has opened up through Obamacare's tax subsidies. At full enrollment the Affordable Care Act could bring the private health insurance industry over 90 billion dollars in annual premiums. With the marketplace enrollment numbers already topping 2 million, a number of publicly traded health insurance companies are already benefiting from the exchanges.

Companies to watch
(NYSE: AET  ) recently acquired Coventry Healthcare and in many states is offering insurance on the marketplace through Coventry instead. While the company has chosen to pull out of a number of the state run exchanges including a well publicized departure from California's individual marketplace, it is poised to compete heavily on the federal marketplace. Aetna's combined plan offerings cover 775 counties in 15 states and include the most lucrative markets in Texas, Florida and Arizona.

WellPoint (NYSE: ANTM  ) which operates under the well known Anthem Blue Cross Blue Shield brand has plan offerings in 612 counties in 12 states on the Federal Marketplace. Anthem also has a heavy presence in many of the state exchanges especially in the state of California which is by far the largest market for the exchanges.

Humana (NYSE: HUM  ) has a smaller national presence, but in the areas the company has chosen to participate, the company will likely capture a large proportion of new consumers. Humana's plan offerings  target high density urban areas and are priced lower than nearly all its competitors. 

Focus on the long term
Both Humana and Aetna have both spoken out regarding concerns with the makeup of the initial enrollment. The primary issue is the possibility that too many sick and expensive consumers are joining the new insurance pools with companies likely to pay out more in costs than they are taking in from premiums. While this may be an issue if it continues three to four years down the line, it is not a big problem early on. For these companies the early news when it comes to Obamacare is all likely to be bad. Clearly sicker and high cost consumers have the most incentive to get covered. This however doesn't mean that the ACA will be bad for insurance companies in the long run. 

First, a number a programs built into the ACA are designed to alleviate problems during this transition period. These programs will help compensate insurers for the adverse selection problems that will drive sicker and more costly patients to enroll first. These transition programs should help minimize the losses incurred by the insurance companies. As the mandate penalties kick in and rise over the next three years, more healthy and net profitable consumers are expected to join the insurance pools. 

Even if the insurance companies initially lose money on the insurance marketplaces, this is outweighed by the long term profitability these consumers may present. When it comes to health insurance, policyholders who have become familiar with provider networks are very reluctant to switch companies even in the face of premium hikes. In addition the federal subsidies that help consumers pay for their plans are pegged to the price of health insurance, shielding eligibile conusmers from some of the potential premium hikes. For the insurance companies, even if the acquisition of consumers results in a short term loss, the high retention in the market and the help of federal subsidies will prove advantageous in the long term.

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  • Report this Comment On February 14, 2014, at 5:33 PM, GuitarJim wrote:

    Older and/or sick people are the only ones with a strong incentive to sign up now. They'll collect more in benefits then they pay in. The risk corridor reimbursements to insurance companies will run out in three years. At that point, the actuaries will HAVE to set premiums at a level that will ensure profitability because the government won't bail them out anymore. Every premium increase is going to drive more healthy people out of the market, which is only going to result in even further premium increases. This is the so-called "death spiral" you often hear about.

    The penalty is a joke. The law prohibits the IRS from imposing liens or levies, criminal charges, or any of their other onerous collection methods. The only means they have to collect is deduct the penalty from the taxpayer's refund. The only thing a taxpayer needs to do in order to avoid paying is to adjust their withholding to ensure they aren't owed a refund.

  • Report this Comment On February 14, 2014, at 10:05 PM, jmgconsultants wrote:

    None of the insurance companies know how many actually paid their premiums because the back end, the gateway has not been built yet. The numbers on the back end are suspect at best. Right now it looks like all the insurance companies are in trouble with many of them going to need a tax payer bailout in the near future. Obamacare is a disaster which needs to be repealed and replaced. It is also going to be the main reason that all the Democrats will lose their elections this year giving the Republicans the Senate and more seats in the House.

  • Report this Comment On February 15, 2014, at 9:48 AM, JePonce wrote:

    The Patient Protection and Affordable Heath Care Act of 2010 is the grandest scam by edict perpetrated on the citizens (meal tickets) in U.S. history.

    Patients are already “protected” by the 1986 law stating “no medical facility will deny treatment to a person based on race, sex, age, national origin, or the ability to pay for treatment.”

    Protected, as in the sense that the Constitution was written to protect the citizens from an oppressive/ progressive government? That kind of protection? We have seen what Obama has done to that, claiming he, the Messiah, holds power to use armed drones to vaporize American citizens on American soil with out warrant and without due process, guaranteed protections by the 5th and 14th Amendments.

    Affordable is the assumption that taxpayer can afford it. Government can not make wealth, it can only take wealth.

    It has nothing to do with either care or caring (an illusion created to disguise it’s true purpose). It is a stretch to claim it is even insurance, since the Supreme Court defined it as a Tax.

    At very best is should be named the Presumably Affordable Health Insurance Tax Act.

    He has what he wants...a piece of legislation on which he can use Fabian Marxism to advance it to his beloved single payer system, sufficient control to bankrupt the insurance industry, citizen taxes to fund it, and the Death Panel to cut medical cost. A win-win for Leftist Elitist, a lose-lose for the citizens his meal tickets. Granny need not worry about her Social Security check, the Obama Death Panel will see to it she won't need it.

    He cannot implement the Employer Mandate until after 2016, as it will kill thousands of businesses, and that is no good during any election year.

    Even Democrat, Nobel Laureate in Economics, Paul Krugman, in his NYT opinion piece states, “To fund Obamacare will require taxes, and to control medical costs requires the Death Panel.”

    Example: My son, at age 24, will be a revenue source for government by providing a large portion of the fruits of his labor to government through taxes for 41 more years. At age 65, that all changes. He becomes an expense to government by collecting Social Security, Medicare benefits, et al. The Death Panel can “shut off his switch” and eliminate its costs.”

    Obamacare is merely rhetoric, and Plato said, "Rhetoric is the Art of Ruling the Minds of men."

    Anyone that sees the scam differently, his mind is under Rule of the Dark Prince.

  • Report this Comment On February 15, 2014, at 10:36 AM, sabebrush6 wrote:

    Isn't that nice of the Obama administration to make the health care insurance companies super wealthy at your expense by law.

  • Report this Comment On February 16, 2014, at 10:58 AM, ISHKANOTA wrote:

    how many plans does the CBO predict will be bought from people that had their plan canceled? today canceled plans are almost double the paid plans . this ACA is a joke, and the longer this administration pretends the ACA is working just fine, the more it is costing the tax payers money and interest.

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