Health of insurers under GOP plan hard to gauge
Analysts expect millions to go without insurance
How would insurers fare under the GOP’s proposal to replace Obamacare? It depends.
A review of profit results for the six health insurers in the Standard & Poor’s 500 stock index since the start of 2014 — the year the Affordable Care Act rule went into effect — shows mixed results. The combined net income of Aetna, Anthem, Centene, Cigna, Humana and UnitedHealth grew at an annual compounded rate of 4.7% in the three years ended Dec. 31, 2016, data from S& P Global Market Intelligence show. Overall, the 60 health care stocks in the S& P 500 grew at an annualized rate of more than 16%.
The results are heavily skewed by Centene, the biggest Medicaid- focused insurer. During that three- year period, Centene’s net income jumped at an annualized rate of 50.5%, compared with a nearly 21% drop for Humana.
How insurers fare under a new plan will hinge on its final details, insurers’ exposure to the ACA exchanges where people who don’t have coverage can sign up for a plan and how much of their total revenue is tied to Medicaid recipients.
“Centene benefited from the Medicaid expansion,” says Michael Newshel, a managed care analyst at Evercore ISI. “Humana just saw a lot bigger losses in the exchanges. ... The idea was the insurers would get all this new business under ACA. But the new business wasn’t profitable business.”
The poor business conditions are why many of the major insurers have pulled out of the exchanges in many states and others are considering it.
Centene’s fortunes could dim under the new Republican plan, says Kim Monk, managing director at Capital Alpha Partners. The reason: The GOP’s new American Health Care Act would scale back subsidies that make coverage affordable. Subsidies would be replaced by tax credits based on age and income.
The new plan’s elimination of the mandate for people to get coverage or pay a penalty, coupled with a reduction in the Medicaid pool, means millions of Americans will go without insurance again.