Obamacarefs Success Has Small Business Dropping Coverage
By Kelly Gilblom and Caroline Chen
Oct 29, 2014 - Bloomberg
U.S. small businesses are dropping health insurance for their workers, as
Obamacare lets them send employees to new marketplaces where they can often get
subsidies from the government to buy coverage.
WellPoint
Inc. (WLP)fs small business insurance products lost 300,000 people this
year, the company said today. Business owners are dropping coverage they
previously bought through WellPoint and other insurers, and instead sending
employees to shop for it on the government exchanges created under the Patient
Protection and Affordable Care Act known as Obamacare.
gYoufve got exchanges up and running and functioning well,h Wayne DeVeydt,
WellPointfs chief financial officer, said today on a call with investors. gSmall
group employers will have an opportunity to re-evaluate whether they choose to
go to an exchange for their employees.h The company is the second biggest U.S.
insurer by market capitalization.
The trend will continue into 2015, DeVeydt said, and WellPoint will try to
recapture those lost customers on the Affordable Care Act markets, where the
insurer offers plans in 14 states. The Indianapolis-based company, the
second-biggest U.S. insurer by market value, currently covers about 1.6 million
people on small business plans.
Small businesses gare dropping coverage and moving to exchanges,h with the
smallest businesses in particular driving the trend, said Ana Gupte, an analyst at Leerink Partners LLC, in a
telephone interview. gTheyfre seeing that happening faster than expected.h
Coverage Options
The Affordable Care Act this year required all Americans to have health
insurance or face a financial penalty. While businesses with 100 or more
employees have to offer coverage or pay a penalty, small businesses donft,
meaning it may make more sense for them and their employees to drop coverage and
buy it elsewhere.
The law provides subsidies to individuals. A family of four making $50,000 a
year, for example, would get about two-thirds of their $9,500 insurance premium
paid for by Obamacare, according to the Kaiser Family Foundation. Before the law took
effect, the majority of small businesses with 100 or fewer workers offered some
sort of insurance coverage, according to the foundation.
Earlier today, WellPoint reported third-quarter earnings, excluding one-time
items, of $2.36 per share, beating the $2.26 average of 22 analystsf estimates compiled by
Bloomberg. The company raised its full-year earnings forecast.
Earnings Report
Third-quarter net income fell to $630.9 million, or $2.22 per share, from
$656.2 million, or $2.16, a year earlier. WellPoint shares rose 1.8 percent to
$122.20 at the close in New York.
Health insurers are racing to capture the new customers added by Obamacare,
which helped 7.3 million Americans enroll in plans as of mid-August, according
to the U.S. The Congressional Budget Office expects about 13 million people to
sign up next year.
WellPoint plans to offer Obamacare plans in 14 states again next year, and UnitedHealth
Group Inc. (UNH), the nationfs largest insurer, is expanding to as many as
two dozen states. Penalties for Americans who choose to go without coverage
double in 2015 to as much as 2 percent of their incomes, which may drive
increased business to the insurers.
The law has also expanded Medicaid, the joint U.S.-state insurance program
for the poor, by raising income thresholds for the program to get more people to
qualify. Next year, 11 million people will be covered by Medicaid, according to
the Congressional Budget Office, up from 7 million this year.