Health of insurers under GOP plan hard to gauge
Either way, 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 that mandated that people who can afford coverage must get it or pay a fine — 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, with roughly 1 million insured through the program, which provides medical benefits for low-income people. During that three-year period, Centene’s net income jumped at an annualized rate of 50.5%, compared to a nearly 21% drop in net income 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 businesses related 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. Their pricing was a lot farther off, and they attracted a worse mix of patients. 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 will in 2020 begin scaling back sizable government subsidies that low-income Americans relied on to make coverage affordable. In the place of subsidies would be tax credits — based on age and income. Credits would range from $2,000 for people under 30 to $4,000 for those over 60 and be phased out for individuals earning more than $75,000 and $150,000 for couples who file joint tax returns. The problem is these tax credits won’t cover as much of the premium cost as the ACA, when the government footed nearly the entire bill. The result will likely be less people insured under Medicaid.
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 that will be able to afford coverage, means more Americans will go without insurance again. Analysts say it is hard to estimate, but the number is seen in the millions, they say.