(A version of this Health Alert was published by Forbes).
You might think this headline is a gag, given how deeply health insurers are dug into Obamacare. Only a month ago, I wrote that health plans’ mastery of Obamacare poses challenge to repeal. Losses in Obamacare’s controversial exchanges are not yet apparent in the publicly listed insurers’ financial statements. However, exchanges comprise of a small (but not trivial) market of about 11 million people. Through 2016, health plans losing money in Obamacare can rely on taxpayers to help them out. After that, they are on their own.
Already, many plans are finding participation painful and increasing Obamacare premiums significantly for 2016. According to Louise Radnofsky of the Wall Street Journal,
In New Mexico, market leader Health Care Service Corp. is asking for an average jump of 51.6{c754d8f4a6af077a182a96e5a5e47e38ce50ff83c235579d09299c097124e52d} in premiums for 2016. The biggest insurer in Tennessee, BlueCross BlueShield of Tennessee, has requested an average 36.3{c754d8f4a6af077a182a96e5a5e47e38ce50ff83c235579d09299c097124e52d} increase. In Maryland, market leader CareFirst BlueCross BlueShield wants to raise rates 30.4{c754d8f4a6af077a182a96e5a5e47e38ce50ff83c235579d09299c097124e52d} across its products. Moda Health, the largest insurer on the Oregon health exchange, seeks an average boost of around 25{c754d8f4a6af077a182a96e5a5e47e38ce50ff83c235579d09299c097124e52d}.
All of them cite high medical costs incurred by people newly enrolled under the Affordable Care Act. (Louise Radnofsky, “Health Insurers Seek Healthy Rate Boosts,” Wall Street Journal, May 21, 2015)
Health insurers might not think the unravelling of Obamacare will hurt them too much. (Certainly, their investors do not). Nevertheless, these rate hikes increase the political risk of their participating in markets they do find profitable.
Last week, Anthem CFO Wayne DeVeydt told investors America’s second largest health plan is looking to use cheap debt to finance further take-overs. Anthem (formerly WellPoint) is the king of consolidation in health insurance, having played a key role in transforming a loose confederation of regional non-profit “Blues” in to a for-profit corporation listed on the New York Stock Exchange.
At the time, the idea of converting a Blue Cross or Blue Shield plan into a for-profit corporation was controversial, both within and without the community of Blues. However, the financial situation demanded new sources of capital.
Anthem has not made a major acquisition since 2012, when it took over Amerigroup for $4.5 billion. Also, of all the health insurers, it is the one that had to do a 180-degree turn when Obamacare passed. Its previous management was hostile to the law. Today, of course, it seeks to expand its market share in the portfolio of government-sponsored programs, primarily Medicare and Medicaid, which offer relatively low-risk profits.
In 2014, Anthem took over a small Florida Medicaid managed care plan, Simply Healthcare, and analysts anticipate future Medicaid acquisitions. Targets include Molina Healthcare, WellCare Health Plans, Health Net and Centene. Analysts also believe stock prices of Humana and Cigna reflect their status as possible take-over targets for either Anthem or Aetna. Wayne DeVeydt, said he would “clearly love to have more scale in Medicare but our focus is first targeting the strategic markets that matter most.”
In other words, Medicaid managed care is the most attractive market, with Medicare Advantage running second. Obamacare exchanges are noticeable only by their absence. Of course, the very existence of Obamacare exchanges as a going concern is at risk in the very short term, in the case of King v. Burwell. If the Supreme Court finds in favor of the plaintiffs, health plans in at least 34 states will lose tax credits that have financed artificially low premiums charged to beneficiaries. Millions will find their Obamacare policies unaffordable.
If Obamacare survives the court challenge, politicians will look to health plans to finance Obamacare’s failures. I expect that profiting from Medicare and Medicaid, while offering unaffordable Obamacare policies – or exiting Obamacare exchanges entirely – will become politically unacceptable. State and federal politicians will seek reforms that force health plans to subsidize Obamacare if they want to make money from other government health programs.
Health plans have increasingly viewed government as a good business partner. That friendly relationship will be tested sooner rather than later.
SOURCE: Health Policy Blog – Read entire story here.