To say that the Affordable Care Act, or "Obamacare," is facing an uncertain future might be putting it mildly.
On one hand, the health law has revolutionized how consumers shop for and purchase health insurance. The result is about 12.7 million consumers signing up for health insurance using Obamacare's marketplace exchanges for the 2016 calendar year, and nearly an equal number of low-income individuals and families gaining access to medical care via the Medicaid expansion in 31 states. All told, the uninsured rate is down more than six percentage points, according to Gallup, since Obamacare went into full effect in the individual market on Jan. 1, 2014.
On the other hand, Obamacare's core principle of "affordability" is under fire now more than ever. The program has been helped by the fact that around 85% of all enrollees are entitled to receive subsidies, thus reducing their premium payments. Millions of others may also qualify for cost-sharing reductions that help cover some, or all, of the costs tied to copays, coinsurance, and deductibles. But millions of uninsured or non-subsidy-receiving Americans are likely to face some hefty premium price hikes in 2017, which are a direct response to losses sustained by a number of insurers. For example, UnitedHealth Group (NYSE:UNH), the nation's largest health insurer, has predicted that it could lose $500 million in 2017 from its Obamacare plans.
"Why are insurers losing money?" you wonder? UnitedHealth has blamed higher-than-expected medical utilization rates and the ease of switching plans from year to year for its financial pains. Other issues could include lower-than-expected young adult enrollment, which may be a direct response to the individual mandate penalties not being steep enough to coerce enrollment, and the ineffectiveness of the risk corridor to buoy money-losing insurers. Although the risk corridor is going away completely in 2017, it was more than $2.5 billion short of requested financial assistance in 2016, causing more than half of Obamacare's approved healthcare cooperatives to close up shop.
Given UnitedHealth's many struggles, it's decided to stop offering plans in more than two dozen of the 34 markets it's currently operating in beginning in 2017. Humana (NYSE: HUM) is following suit after sustained losses, and has announced it's exiting a handful of states next year.
Three insurers looking to expand their Obamacare coverage
However, not all insurers are running for the exit, even if they're struggling to turn a profit on existing Obamacare plans. The following three insurers are looking to expand their coverage in the upcoming year.
Despite reporting an operating loss of between 3% and 4% on Obamacare plans in 2015, Aetna (NYSE: AET) announced earlier this month that it plans to remain in all 15 states that it currently offers plans in in 2017. Of course, Aetna also cautioned that this would still be dependent on rate requests within these states, too.
In addition to remaining in 15 states, Aetna may be looking to expand into a few other states, although no specific states were cited by the company as targets. Aetna's eagerness to expand is particularly interesting because it's in the process of acquiring Humana, which can't seem to hit the exit quick enough.
In December, CIGNA's (NYSE: CI) CEO, David Cordani, told the world that his company hadn't yet made a cent in profit off of the Obamacare plans it was offering in seven states. Yet this hasn't deterred CIGNA one iota. Not only does CIGNA intend to remain in the seven states it's been operating in, but it has plans in the works to expand. Here's what CIGNA spokesperson Joe Mondy told Fox Business back in April.
"CIGNA expects to continue participating in the individual insurance market, and is currently in the process of filing 2017 individual plans. We currently intend to selectively expand our public exchange presence into a few new geographies in 2017. We remain committed to the public exchange market and the vital role it plays in providing many individuals with access to affordable, high-quality healthcare."
Adding even more fuel to the fire is the fact that Anthem (NYSE: ANTM), the national insurance giant behind the well-recognized Blue Cross Blue Shield brand in 14 states, is attempting to buy CIGNA in a $54 billion deal. Anthem also has visions of Obamacare individual market expansion on its mind.
Lastly Centene (NYSE: CNC), which has been a major beneficiary of the aforementioned Medicaid expansion in 31 states, could be looking to expand its network. Having acquired Health Net, and having boosted its total membership by 7.1 million to 11.5 million as of the latest quarter, Centene has transformed into a national player that's using its loyal government-sponsored customer base as a backbone for future growth.
For instance, Centene announced an improvement in its health benefits ratio of 110 basis points during Q1 (this ratio is a measure of how much it spends in medical care for members versus how much it brings in via premiums), and also managed to grow its individual marketplace enrollment to 683,000 from 161,700 in Q1 2015. Focused on keeping costs low, Centene has all the more reason to expect cost-conscious consumers to bring it heftier profits.
It's worth keeping in mind that the actions of individual state Insurance Commissioners could impact expansion promises for any of these aforementioned insurers -- and early rate requests have called for some pretty substantial premium hikes. The outcome of the presidential election in November could have an impact as well, with likely Democratic Party nominee Hillary Clinton wanting to build upon Obamacare, and Republican Party presumptive nominee Donald Trump wanting to tear it down and start anew.
Long story short, there are still a lot of dynamic factors at work within the insurance industry, but it would appear that an Obamacare-induced rush to the exit isn't in the cards for the insurance industry as a whole.
Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.
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