Another Obamacare controversy? Say it ain't so.
The latest dust-up relates to how many individuals who signed up for insurance on the online exchanges established by the Affordable Care Act, commonly referred to as Obamacare, have actually paid their premiums. In March, former Secretary of Health and Human Services Kathleen Sebelius announced that between 80% and 90% of Obamacare plan enrollees had paid their first-month premiums. This week, though, the U.S. House of Representatives Energy and Commerce Committee reported that the number is significantly lower -- only 67%.
Which figure is more accurate? And could the lower percentage of first-month premium payers make a difference for your finances? Get ready for more controversy.
He said, she said -- and they said
Former Secretary Sebelius didn't pull her numbers out of the air. She merely cited figures that insurers passed along to the federal government. Just this week, WellPoint (NYSE:ANTM) CEO Joe Swedish confirmed that his company is seeing a "very strong" premium payment rate of 90%.
The House Energy and Commerce Committee, though, obtained its numbers from health insurers also. According to the committee's press release, "every insurer" that participated in the federal exchange sent data for enrollment through April 15. That data showed that one-third of individuals and families signing up for Obamacare didn't pay up and therefore won't actually be enrolled. This finding implies that the real enrollment number for Obamacare could be closer to 5 million than the 8 million figure announced by the White House.
However, there's one key catch with the percentage reported by the House committee: It's not the final tally. According to the Centers for Medicare and Medicaid Services, there are around 300 insurers participating in the Obamacare exchanges. The committee's data reflects only 160 insurers.
Also, many individuals still had time to pay their premiums in the days following April 15 -- the cut-off date for data supplied by insurers to the committee. Then there's the unknown number of people who signed up after the March 31 open enrollment deadline thanks to extensions granted by the Obama administration. The House Energy and Commerce Committee plans to obtain updated data by May 20.
Does it matter?
Even if the final enrollment number turns out to be around one-third lower because of lack of payment, could it impact you financially? Perhaps -- but there's still more squabbling on that topic.
Lower enrollment, particularly in the coveted 18-35 age bracket, could lead to insurers jacking up rates in 2015. In February, Aetna (NYSE:AET) CEO Mark Bertolini told CNBC that his company might have to double its rates. WellPoint echoed that outlook in March. If you purchase health insurance through the Obamacare exchanges and were not eligible for the tax subsidies, such a hike would mean bad news for your pocketbook.
However, WellPoint seemed to back off a bit this week in an email reported by The Washington Post as stating that "rates will vary by market" but "may not be what we thought from previous reports". Also, the Congressional Budget Office, or CBO, recently estimated that exchange premiums should only rise by around 3% on average next year then move up to average annual increases of 6% through 2024.
There could be reason for some skepticism about the CBO estimate, though. In Aetna's earnings call this week, analyst Scott Fidel with Deutsche Bank hinted at higher rate jumps based on what he has heard from insurers. Mark Bertolini responded that premium increases will vary by market -- with some only in the single digits but others in double digits. He also noted that uncertainty from multiple changes to Obamacare over the last few months will cause rates to be higher.
You could also potentially feel a financial sting from lower Obamacare enrollment numbers if you own stock in certain companies. Insurers like Aetna and WellPoint actually might not face as much risk as other companies.
For example, Express Scripts' (NASDAQ:ESRX) shares dropped sharply this week after the company partially blamed sluggish Obamacare enrollment for its disappointing first-quarter results. The large pharmacy benefits manager stated that its numbers fell below the mid-point of previous guidance because of "severe winter weather, later than expected enrollment in public exchanges and lower net new health care reform lives".
Express Scripts' woes stem from mainly temporary issues. Winter is over. Obamacare enrollment numbers picked up steam late in the game. However, should the House committee's figures prove to be close, Express Scripts and other companies hoping for strong Obamacare enrollment could be hurt -- along with their shareholders.
What's next with this brouhaha? Final enrollment numbers should be released by the House committee within a couple of weeks after May 20. Insurers must submit their 2015 rates by late June. The enrollment controversy appears likely to rage on for now -- but an end is in sight.
Will this stock be your next multi-bagger?
Give me five minutes and I'll show how you could own the best stock for 2014. Every year, The Motley Fool's chief investment officer hand-picks 1 stock with outstanding potential. But it's not just any run-of-the-mill company. It's a stock perfectly positioned to cash in on one of the upcoming year's most lucrative trends. Last year his pick skyrocketed 134%. And previous top picks have gained upwards of 908%, 1,252% and 1,303% over the subsequent years! Believe me, you don't want to miss what could be his biggest winner yet! Just click here to download your free copy of "The Motley Fool's Top Stock for 2014" today.
Keith Speights owns shares of Express Scripts. The Motley Fool recommends Express Scripts and WellPoint. The Motley Fool owns shares of Express Scripts and WellPoint. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.