Is Obamacare Really Saving People Money?

A Kaiser Family Foundation study shows an even split between those saving or paying more for healthcare insurance, calling into question whether people signing up for UnitedHealth Group (UNH) or WellPoint (WLP) plans will keep paying.

Jun 29, 2014 at 1:25PM

A new survey conducted by the Kaiser Family Foundation suggests that Obamacare is working for some and falling short for others.

The survey questioned people who were insured in the non-group market and included people who signed up through the Affordable Care Act exchanges or independently through insurers or brokers.

The findings of the survey, which include discovering that premiums were just as likely to be lower as they were higher for people who had coverage previously, could have implications on the public exchange's success in enrolling people in plans offered by insurers including UnitedHealth Group (NYSE:UNH) and WellPoint (NYSE:ANTM) when open enrollment begins again in November.


Source: Kaiser Family Foundation.

Flipping the coin
According to the study, people switching from plans no longer allowed under reform were just as likely to pay more as they were to pay less. However, that may understate the benefit to low- and middle-income members who receive government subsidies to pay their monthly premiums.

The Department of Health and Human Services, or HHS, recently reported that the average person signing up for coverage through health received subsidies that resulted in an average monthly insurance payment of less than $70.

Despite those subsidies, however, paying for coverage remains a major hurdle for insurers who are counting on healthy, newly enrolled members to continue making their payments.

Kaiser found that roughly 60% of those enrolling in health care plans had previously gone without coverage, ostensibly because of its cost.

Although the monthly costs are significantly lower for those receiving subsidies, nearly half of those surveyed said they're not confident they would be able to pay for a major illness or injury, 40% said paying their monthly premium is a challenge, and more than 60% worry that they may not be able to make their payments in the future.

That finding could be concerning to major insurers UnitedHealth and WellPoint, which offers plans in 14 states, if it means more people than expected fail to follow through on their applications with payments.

So far, WellPoint reports that about 80% of the 600,000 members signing up for its plans through the exchanges are making their payments. If more people fail to continue paying, WellPoint's revenue and earnings growth could end up being lower than expected.

Overcoming frustration
The people who appear most unhappy with the cost and coverage provided by their exchange plans are those that were previously covered by plans no longer allowed under Obamacare.

Those plan switchers say they're paying more to participate in provider networks that don't offer as many choices. Plan switchers who don't receive subsidies are particularly frustrated with reform.

The frustration felt by these plan-switchers may be one reason the insurance industry is looking to expand the availability of cheaper catastrophic plans offered through the marketplace.


Source: AHIP Association.

Following a recent conference of major insurers, the America's Health Insurance Plans association called on regulators to expand access to catastrophic plans beyond those applying for a hardship exemption. The association also asked regulators to allow for subsidies for those catastrophic plans. That would mark a dramatic switch by the administration, given its position has been that such plans fail to provide adequate coverage and as a result, don't qualify for subsidies.

If insurers can successfully lobby Congress to make a switch to catastrophic plans, it could provide those still feeling a pinch from higher plan prices with a lower-cost alternative.

Fool-worthy final thoughts
Obamacare is succeeding in signing up uninsured Americans given that roughly 60% of those enrolling in plans had been previously uninsured. But, at least if this survey is to be believed, it may be falling short in making health care affordable.

There's little question insurers like UnitedHealth and WellPoint will see revenue grow this year thanks to the 8 million who signed up through exchanges for coverage, but maintaining the momentum and keeping healthy, new members on plans may require more changes, and the impact of any potential exchanges on each insurer's profit is still unknown.

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Todd Campbell has no position in any stocks mentioned. Todd owns E.B. Capital Markets, LLC. E.B. Capital's clients may or may not have positions in the companies mentioned. Todd owns Gundalow Advisors, LLC. Gundalow's clients do not have positions in the companies mentioned. The Motley Fool recommends UnitedHealth Group and WellPoint. The Motley Fool owns shares of 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.

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