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 Some insurers already expect to lose money this year
following the rocky launch of President Barack Obama's Affordable
Care Act, which aims to provide coverage to millions of uninsured
Americans with the help of government subsidies. The rollout was
marred by technical errors that held up early enrollment,
last-minute regulatory changes and steady political opposition from
Republicans.
For 2015, insurers must describe their health plans and proposed
rates to state and federal regulators starting in April and May. But
before they do, some of the most important factors that go into
those decisions may not be known, from the size of the doctor and
hospital networks that the federal government will approve to final
2014 enrollment figures and the relative health of their new plan
holders.
Without that data, said Jon Urbanek, senior vice president of
commercial markets at Florida's market-leading Blue Cross Blue
Shield, "I can't tell you exactly yet that we've decided about
counties and products and all those pieces, but we feel like
participating in the marketplaces is very consistent with our
mission."
Cigna Corp Chief Executive Officer David Cordani said the nation's
fifth-largest insurer was still undecided on which if any new
markets it might enter, although "that decision needs to be made in
short order," he said in an interview.
The result, industry executives and experts say, is that some of the
larger insurers may pull out of individual markets where they
already know they can't make money. Otherwise they will try to hold
steady until 2016, when the number of people on Obamacare plans is
expected to surge as high as 22 million.
Some smaller insurers offering health plans in 2014 may back out
altogether if they can't afford to ride out the program's early
troubles.
"There will be some sort of a shakeout," said Tim Jost, a health law
expert and professor at Washington and Lee University in Virginia.
Small health plans and cooperatives that priced their health
coverage too high and got few customers are among the most
vulnerable, he said.
"On the other hand, (the national insurers) have been watching the
markets, and if 2014 turns out to look better than expected, they
may jump in," Jost said.
John Morrison, who founded The National Alliance of State Health CO-OPs,
a trade group, was more optimistic about the small insurers. He said
the coops have low overhead and are required to keep enough capital
on hand to last them into at least the second or third year of the
exchanges. They will all be open, he believes, and enrolling new
customers in 2015.
PRICE, POLICY SURPRISES
A handful of large insurers have won most of the customers so far
among more than 100 active on the Obamacare marketplaces in the 50
states. By their own estimates, WellPoint, Aetna Inc, Humana Inc,
and Health Net together pulled in about 970,000 enrollment
applications by the end of January out of about 3 million nationwide
at that time.
But large insurers including Cigna and Aetna said they do not expect
to make money this year on the new Obamacare exchanges.
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In January, Aetna Chief Executive Officer Mark Bertolini
suggested that the company's participation in 2015 could depend on
whether the administration would allow it to raise rates enough to
cover expenses.
"Are (rate increases) going to be double-digit, and are we going to
get beat up because of the double digit, or are we going to just
have to pull out of the program? Those questions can't be answered
until we see the population we have today," he said in an interview
with cable news channel CNBC.
Health Net said it is breaking even on its exchange customers after
hitting targets in Southern California, its largest market. As of
early February it had signed up 168,000 people in California and
Arizona.
I feel like we're all in and we are happy we are," Health Net Inc
CEO Jay Gellert told investors in January.
Insurers are also bracing for more late policy changes that could
disrupt the Obamacare business model. Just last week the
administration said it would allow insurers to extend by two more
years health policies that were supposed to end in 2014 because they
don't comply with the healthcare law.
"We expect consumers will continue to have a robust number of plan
choices available to them for the 2015 open enrollment season as
insurance companies compete for the business of millions of
Americans seeking coverage with the assistance of tax credits," said
Aaron Albright, a spokesman for the Centers for Medicare and
Medicaid Services, which oversees the Obamacare marketplaces.
Actuaries, who help insurers calculate what rates to charge, note
that the government's most recent guidance to the industry, in the
form of a 300-page report released last week, raised new questions
on how to predict the Obamacare market in 2015.
For instance, the government said it is still considering what
percentage of health insurance premiums paid to insurers must be
used to cover medical expenses rather than administrative costs, a
decision that could directly impact industry profits.
"Even when something is a final rule it has not meant that it is not
subject to further change," said Hans Leida, an actuary at Milliman,
referring to the government's regulation of Obamacare. "There is
still great uncertainty to come."
(Reporting by Caroline Humer; editing by
Prudence Crowther)
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