A recent wave of earnings reports shows that while some major insurance companies are committed to the Obamacare exchanges for now, others are already scaling back their participation, and there are signs that prices for coverage may have to be hiked going forward to keep the companies profitable.
It’s a set of trends that could spell trouble for the fledgling national insurance plan, and require solutions from the next president and future Congresses.
The five biggest insurers in the country — UnitedHealth, Anthem, Aetna, Cigna and Humana — released their financial results for the first quarter over the past few weeks. None of the insurers posted a big profit from their Obamacare business, although most did post profits overall thanks to other business sectors such as employer-based insurance.
Of the five, UnitedHealth and Humana both announced they would exit part of the Obamacare marketplaces. UnitedHealth has said it will exit a majority of the 34 states where it offers Obamacare plans next year, and Humana said earlier this week it will exit some markets, but didn’t say how many.
Humana also said it may have to raise premiums to ensure the individual business remains profitable.
The remaining three insurers remain committed to the exchanges and believe they will be profitable in the near future.
“Over time, we do believe we’re well positioned for continued growth in the exchange marketplace if the market stabilizes to a more sustainable level,” said Anthem CEO Joe Swedish in an investor conference call. Anthem has nearly 1 million enrollees in Obamacare, one of the biggest Obamacare insurers in the country.
But Swedish did admit that the “performance of the exchange marketplace has lagged expectations throughout the industry.”
Some smaller insurers say they are generating profits in Obamacare. Centene recently said that its Obamacare exchange business has been profitable and the insurer is looking into moving into more states for 2017. The insurer has more than 600,000 Obamacare customers.
But others are struggling, and part of the issue some insurers are having is the pricing of plans. Insurers did not know how to price their plans when Obamacare’s markets were set up in 2014, some experts said.
That means more price hikes could be coming.
“It’s now clear that many insurers under priced their plans, and that premium hikes will likely be higher in 2017,” said Larry Levitt, senior vice president of the nonpartisan Kaiser Family Foundation. “Most marketplace enrollees are receiving premium subsidies, and they are protected from premium increases so long as they’re willing to switch to lower cost plans.”
Many have speculated that decisions by UnitedHealth and Humana might also lead to price hikes, although Levitt said it shouldn’t be a big factor nationally.
While it will raise some premiums and lower choice in certain parts of the country, “they’re not major enough players in the marketplaces to create much more than a blip nationally,” he said.
But the insurers’ problems may be part of a bigger problem: sicker insurance pools, said Michael F. Cannon, director of health policy studies for the libertarian think tank Cato Institute.
Sicker insurance pools can cause insurers to devote more costs to healthcare, which can affect their finances. More evidence of sicker pools could come when remaining carriers file their premium rate requests for 2017, Cannon said.
Then, the market may see “departures by carriers whose rate requests the regulators reject; and throughout the year when carriers and the administration demand more subsidies,” he said.
The administration is already taking steps to address the financial problems insurers are having in the Obamacare marketplaces. On Friday, the administration made it harder for people to take advantage of special enrollment periods to enroll year-round in Obamacare.
The enrollment periods enabled some customers to sign up for Obamacare when they get sick and drop out when they are better, wreaking the finances of some insurance pools.
