Obamacare may get more bad financial news next week, as more insurers are expected to report financial issues due to the healthcare law.
Insurance giants Cigna and Aetna will release 2015 financial results next week and Humana on Feb. 10. The results come on the heels of rivals Anthem and UnitedHealthcare reporting poor business on the Obamacare exchanges.
Financial results provide a clue to insurers’ thoughts on the healthcare law and the stability of its exchanges. Last year, UnitedHealth made waves when it said it might leave the exchanges due to mounting losses.
The other four insurers reaffirmed their commitment to Obamacare, but each has hinted at financial problems linked to the exchanges.
Humana is expecting a decline of up to nearly half of its individual market membership by the end of this year, according to a Jan. 8 regulatory filing.
The individual market represents people who don’t get insurance through work, and a majority of the market is comprised of Obamacare’s exchanges.
The insurer, which will announce its full 2015 results on Feb. 10, said the figure takes into account both exchange and off-exchange members.
On Monday, Aetna will provide its annual financial results for 2015. The insurer said during a November investor conference that its business on the exchanges has been unprofitable.
However the small group market, which is composed of businesses with two to 100 employees, was profitable but below the insurer’s target.
On Feb. 4, Cigna will provide its results. It already has hinted at a January investor conference that the number of individual market customers declined.
Cigna also said last year that so far it has not made any money in Obamacare, but will remain in the exchanges.
Insurance giant Anthem has said the same thing, even though Obamacare hurt its profitability in 2015.
The insurer said Wednesday that profits in the fourth quarter dropped by 64 percent from a year earlier. Contributing to the drop was the increased cost to provide care to Obamacare enrollees, the company said.
Anthem has about 800,000 people in the individual market, but expects that membership to decline by about 300,000 people this year.
“Unsustainable pricing in some markets is hurting our market share,” CEO Joe Swedish told reporters. “We are encouraged that early indicators in open enrollment activity are slightly better than our expectations.”
Swedish said the insurer still hopes to be profitable on its exchange business this year but below the 3 to 5 percent profit margin it was expecting.
He added that he isn’t confident he will get help from the Obama administration to offset losses. The administration set up a series of programs called the 3Rs, which are reinsurance, risk corridors and risk adjustment.
The idea was to provide funding to insurers to compensate them if their costs rose too much. The funding was supposed to act as a safety valve for insurers since the Obamacare marketplace was entirely new and insurers didn’t know who would enroll or how sick they were.
That uncertainty can make it difficult for insurers to set accurate premium prices.
Swedish said Anthem still isn’t banking on getting a lot of money from the 3Rs
“Even in the last year, our conservative nature on some of these 3Rs has proved to be prudent,” Swedish said.
UnitedHealthcare reported losing $720 million from its individual market earnings in 2015.
UnitedHealthcare is the only insurer of the big five that is not in the midst of merging. Anthem and Cigna are pursuing a merger and so are Humana and Aetna.
United posted higher profits overall compared to the year before when taking into account all of its business, including employer-sponsored plans. United’s revenue grew 20 percent from 2014 to $157 billion.
The administration has made some moves to help insurers, including eliminating several special enrollment periods. Those periods enable someone to enroll in Obamacare year-round, not just during the open enrollment period.
Year-round enrollment could wreak havoc for insurers as someone could sign up when they get sick and drop coverage when they get better.
Administration officials have said that the marketplaces are still in their infancy and shouldn’t be judged on one year’s results.
“Consumers are still getting educated and health plans are experimenting with the right product and network designs,” said Andy Slavitt, acting administrator for the Centers for Medicare and Medicaid Services, during a recent healthcare investor conference.
Slavitt said the individual mandate penalty, which this year is more than $600 for not getting insurance, is prompting younger enrollees to sign up.
So far all the big five insurers except for United have signaled they are going to ride things out on the exchanges.
But even if United, the country’s largest insurer, were to pull out of Obamacare, it may not be catastrophic, according to a report from the Robert Wood Johnson Foundation and center-left think tank Urban Institute.
The report said that United doesn’t offer cheap plans in many of the exchanges it participates in. Since most customers are shopping based on the lowest price, a pullout may not have a large impact, the report said.
“Data on market share by insurer are difficult to obtain, but with very high premiums it is likely that United had a relatively small share of enrollees,” the report said.
