Donft believe the hype: Health insurers think Obamacare is going to be fine
By Sarah Kliff, Updated: January 15 at 2:26 pm - Washington Post
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SAN FRANCISCO -- Obamacare's troubled rollout hasn't scared insurers out of
the marketplace. Instead, speaking to thousands of health-care investors
gathered in San Francisco, plan executives describe the Affordable Care Act as,
at worst, a fixable mess and, at best, a major growth opportunity.
The executives' commentary was a reminder that the health-care industry
doesn't set its watch by the election cycles which dominate Washington. They
expected Obamacare to be a bit of a mess in 2014 -- but they're in it for the
long haul.
"We believe that over time, a lot of these bumps will work themselves
out," Joe Swedish, president of Wellpoint, the countryfs second-largest
health plan, said in an interview with The Washington Post."We have always
expected it to have a sort of lumpiness to it, the rollout. It's certainly
become more lumpy than one would have predicted [but] over time, this will work
out."
gOur view is wefre still in the early innings,h Cigna chief executive David
Cordani told a standing-room only crowd of investors at the J.P. Morgan
Healthcare Conference. gThe first couple of years will be choppy, and wefre
learning whether it can find its legs.h
Health insurers arguably have the biggest financial stake in the exchangesf
success. They are the ones who are selling products on the new marketplaces, and
who would have to bear the costs of covering a sicker-than-expected exchange
population.
But even after a troubled launch, and with early enrollment shaping up to be
lower and older than expected, plan executives generally cite two reasons
theyfre not panicking -- and not pulling out of the exchanges after year
one.
First, many approached 2014 as a test year for the Affordable Care Act and
participated in only a handful of exchanges to test the waters. On average, the
exchanges currently account for about 2 percent of insurersf revenues, according
to J.P. Morgan managed care analyst Justin Lake. Health plans expected that the
first year would be rough, so they preemptively limited their exposure.
gAlthough they may garner the most headlines, we do not expect the new health
benefit marketplaces to be a significant factor to 2014 earnings,h Lake writes.
gWe think the downside risk of low initial enrollment for large, diversified
managed care companies is limited given that this is a relatively small portion
of their business.h
And even as the health exchanges grow, they will likely still remain a
smaller part of a health planfs business. The Congressional Budget Office
projects that, when fully implemented, the marketplaces will cover 7 percent of
the population, or 30 million people.
This explains why, as investors lob questions at these executives, they
mostly ask questions about issues that donft make many headlines, like how the
insurerfs Medicare Advantage products will perform or whether they will win more
state Medicaid contracts. Exchange enrollment, by contrast, often takes a
backseat.
gItfs not something that jeopardizes our guidance for this year,h Michael
Neidorff, chief executive of managed care company Centene, said of relatively
low enrollment in exchange plans. gRight now, wefre satisfied getting a toe in
the water, so to speak, getting experienced, and getting recognized for having
this capacity.h
To be sure, the rocky rollout hasnft gone unnoticed among health plans.
Humana lowered its expectations for exchange enrollment in early January, as it
saw many of its subscribers re-enrolling on grandfathered plans after the White
House decision to allow those plans to continue for an extra year.
gMore people are staying off the exchange in the underwritten product,h
Humana chief executive Bruce Broussard said. gIn the underwritten products they
tend to have a better health status.h
At the same time, Humana does not currently plan to pull out of any of the
state exchanges where it currently sells. Instead, Broussard says, it's still
waiting to see how enrollment shapes up by the end of open enrollment in
March.
gItfs too early in the game,h Broussard said. gWe need to understand whatfs
going to transpire. There are too many uncertainties right now.h
And other insurers still view the health-care law as a major growth
opportunity, one which allows them to expand their footprint in the individual
market.
Wayne DeVeydt, chief financial officer of Wellpoint, the countryfs
second-largest health insurer, said that they have seen higher enrollment among
sicker patients -- but that the health plan expected that type of trend in its
first year.
gThings arenft necessarily way out of whack with our expectations,h he says.
gItfs not about whether or not youfre getting a sicker book. Itfs whether you
priced for it.h
Wellpoint has already made a significant investment preparing for the
exchanges; the health plan did exchange shopping simulations with 55,000
potential shoppers across eight states to help figure out what type of plans it
should sell and how much the premiums should cost.
Chief executive Swedish said he still believes that front-end investment will
pay dividends, as the health exchanges find their footing. Wellpoint, as he puts
it, is in it for the long haul.
"Some have asked are we committed to the exchanges going forward and just to
underscore our view, it is the law, it will be executed albeit with continued
lumpiness over a period of time," he says.