Like it or hate it, Obamacare's mission to insure more Americans seems to be working. A recently conducted poll by Gallup shows that the percentage of Americans lacking healthcare insurance has fallen to 13.4% from a peak of 18% in 2013.
Gallup and Healthways, its partner on the poll, have been conducting research on the uninsured rate since 2008, and the current reading is the lowest they've seen so far. The measure has fallen sharply since the first open enrollment period for Obamacare kicked off last fall, and with the second open enrollment period beginning on Nov. 15, it's likely the percentage will drop further in 2015. If so, it could prove to be good news to major healthcare insurers WellPoint (WLP +2.52%) and United Health Group (UNH +1.03%).
WellPoint embraced the healthcare insurance exchanges broadly in the first open enrollment season by offering plans in 14 states, and United Health announced it may offer plans in as many as 24 states this time around, up from just four last time.
Industry watchers expect more people will sign up for coverage this year than last year because of greater awareness of the program and of the fees associated with failing to obtain healthcare insurance. Those fees are set to increase in 2015, adding pressure on the uninsured to select plans when the exchanges reopen next month.
Based on the financial results of insurers in 2014, it appears that enrollment is tracking about in line with expectations. For example, WellPoint entered 2014 guiding investors to expect earnings per share of $8 or better, but has since increased those expectations to earnings per share of at least $8.60.
The company's optimism stems from signing up 769,000 members through the exchanges, rather than the 600,000 originally projected, and the addition of 446,000 new members served thanks to Medicaid expansion. Overall, the amount of care those new members are demanding also appears to be manageable, given that the company expects its medical loss ratio, which measures the percentage of premiums paid for member healthcare, to be 83.5% this year.
United Health's second-quarter results prompted a similarly encouraging bump up in its full-year earnings guidance, improving the low-end of its forecast to between $5.50 and $5.60 per share, up from between $5.40 and $5.60 previously. We'll get additional insight into whether the third quarter supports another increase in the company's guidance when the company reports results on October 16th.
Where was the improvement greatest?
The Northeast remains the region with the lowest uninsured rate, at just 9.8%; but, thanks to a 4% improvement this year, the Midwest has seen the greatest decline this year.
However, if we go back further and consider each region's peak rate of uninsured, it's the West that has seen the most dramatic decline in the level of uninsured. In the third quarter of 2013, 21.7% of people in the West lacked health insurance; but that rate has since dropped to 13.9%.
Based on the Gallup poll, a 17% uninsured rate means that people in the South are still at the most risk of suffering a blow tied to medical expenses.
Looking ahead
Clearly, the biggest opportunity for insurers to boost membership exists in the South. So far, Southern states haven't broadly adopted Medicaid expansion; but there are signs that may be changing.
For example, Arkansas recently won approval to expand Medicaid by providing funds to eligible participants that can be used to buy qualifying plans on the exchanges. Kaiser Health Foundation thinks that could insure up to 200,000 people.
But its not just the South that should see rates fall again next year. Pennsylvania and New Hampshire have also expanded Medicaid for 2015. However, with just 28 of the 50 states signing on so far, there's more room for additional growth during the coming years.
As we shift to the second open enrollment, it's likely we'll see exchange membership outpace the 7 million paying subscribers that joined the last time around. Couple new exchange members with newly enrolled Medicaid members, and insurers may find earnings tailwinds from rising membership continues in 2015.
