President Obama repeatedly promised that his signature health law, the Affordable Care Act, a.k.a. Obamacare, would reduce insurance premiums by $2,500 for the typical family.
ObamaCare: United Healthcare’s surprise warning that it may scrap participation in federal health care exchanges is more than bad news for consumer choice. It’s a broader sign of an unsustainable system.
The nation’s largest health insurance provider surprised the markets Thursday by saying losses from its 550,000 individual ObamaCare exchange enrollments were sharply cutting its bottom line. That’s notable because ObamaCare exchange participation only forms a small slice of the $105 billion company by market capitalization.
Yet it was enough to make the giant company and all the value it creates throughout its many operations suffer enough to trigger, as IBD market reporter Jed Graham wrote, “a surge of red ink.”
The company forecast $425 million less revenue in the fourth quarter and cut its full-year 2015 earnings-per-share forecast to $6 from $6.25-$6.35.
Not surprisingly, its stock fell 5.6% by the close of trading Thursday, and other health care and hospital companies such as Aetna, Anthem, Tenet, Cigna, Humana and HCA took similar hits.
“We see no data pointing to improvement,” UnitedHealth Group CEO Stephen Helmsley said on a conference call. Patients, he explained, were using their plans more than the company had anticipated and, worse still, were dropping coverage when they got well.
Bad as that is for company profits, it’s a predictable outcome given the structure of the law and what it permits.
What Helmsley described was a company caught up in the classic “death spiral” that IBD and reputable economists have been warning about: Insurance policy sales going in the main to the sickest patients who use the most health care services, while the high prices of the larded-up government-mandated packages continue to drive off younger, healthier consumers.
DOH! It’s not like it was predictable or anything… 🙂
In short, the ObamaCare master plan of having young and healthy consumers subsidize the oldest, sickest patients isn’t working as the White House’s central planners and self-proclaimed experts claimed.
Not that the ideologically rigid Obama and The Democrats will care. They will continue to hammer on it until you give in to government control of who lives and who dies and the Insurance companies go bankrupt leaving only the government left.
That’s Democrat “compassion” for ya… 🙂
What’s striking here is that UnitedHealth is no tiny startup ship with a narrow margin of error riding the big ObamaCare regulatory waves. It’s the biggest of the big, a conglomerate that’s the product of the consolidation of the industry — Anthem and Cigna, UnitedHealth and HCA, HCA and private investors — that was supposed to enable the sector to absorb the blow of higher costs of insuring more customers and still continue to do well.
That’s not happening.
What’s more, UnitedHealth was in the ObamaCare exchanges for only a year, during a window of time when the government was supposed to cushion insurers against losses in the ObamaCare transition. The cushion ends next year, leaving companies on their own.
(Insert “Jaws” theme music here) 🙂
Will smaller health care companies really be able to make a profit in an atmosphere that even UnitedHealth found impossible to sustain a profit in? There’s plenty of reason to wonder, as the markets did Thursday. (IBD)
Several nonprofit insurance cooperatives that were supposed to compete for customers on the exchanges have folded. Meanwhile, some big publicly traded insurance companies, including Anthem, Aetna, Cigna and Humana, say they are enrolling fewer people than expected or even losing money.
A recent report by McKinsey & Co. found that the industry lost a total of $2.5 billion, or $163 per customer, in the individual market.
Insurance companies have had trouble attracting healthy customers to the exchanges to purchase their insurance products, many of which have deductibles of thousands of dollars.
The industry’s troubles are reflected in the insurance products being offered on the exchanges during the current enrollment period, reports The Wall Street Journal:
“For these plans, which will take effect in 2016, many insurers have raised premiums in order to cover the medical costs of enrollees, which have run higher than many companies originally projected, fueling this year’s losses. Insurers have also shifted to offering more limited choices of health-care providers”
Still, no other big insurer has signaled its intention to leave the exchanges. (NPR)
YET. But it will come. But don’t worry Obama and The Democrats are from the Government and they are here to help you! 🙂
The average premium for medium-benefit plans offered to 40-year-old non-smokers will rise 10.1% in 2016, according to the Kaiser Family Foundation.