Health Insurance

Health insurers start getting the hang of Obamacare as GOP pushes replacement plan

Insurers are running out of time for 2018 rates
Insurers are running out of time for 2018 rates

The Trump administration is rushing to repeal and replace Obamcare, with an urgency they say is needed due to the imminent collapse of the individual health insurance market under the current health-care law.

But financial results from one of the nation's largest Obamacare health plan providers suggest the tide is beginning to turn for insurers just as the rules are poised to change.

Health Care Services Corp.'s improved results for 2016 may be a sign that health insurers are starting to get a better handle on pricing plans for exchange enrollees. This comes as Congress debates a plan the Congressional Budget Office estimates could result in millions becoming uninsured.

"Health Care Services Corp. had big losses, and it seems the amount of losses they're making is much less in the individual segment," said Deep Banerjee, an S&P Global director and health insurance analyst. "Overall, their net income has also improved year over year."

Health Care Services' so-called medical loss ratio was 96 percent for 2016 on its Affordable Care Act exchange plans, the company reported in a regulatory filing. This means the not-for-profit health insurer paid out 4 percent less on medical claims than it collected in premiums.

The previous year, the nonprofit Blue Cross Blue Shield health insurer, which covers 15 million people in five states, reported paying out 18 percent more in medical costs than it had collected on ACA premiums.

"Some of our plans say they've had success in starting to manage the health care of this population. They really were feeling they were getting onto a much better path with their individual business," said Ceci Connolly, president and CEO of the Alliance of Community Health Plans, a trade group that represents some the nation's largest not-for-profit insurers.

"That's a little bit of the irony of this: Three years into (Obamacare) they were getting the hang of the pricing" and now Congress is poised to change rules, she said.

GOP plan 'nonstarter' for insurers

Insurers have praised some of the regulatory changes that the Trump administration has instituted to try to stabilize the individual market, such as tightening special enrollment rules. The industry has been more cautious about the House GOP health bill known as the American Health Care Act.

Now, the nonpartisan CBO estimates that 14 million more people would be uninsured next year if the law is passed, in part because the repeal of the Obamacare requirement for individuals to buy insurance.

"The Congressional Budget Office is estimating that premiums are likely to go up 15-20 percent simply because of the repeal of the individual mandate, and the expectation that fewer healthy people will sign up," said Sabrina Corlette, a research professor at the Center on Health Insurance Reforms at Georgetown University.

Longer term, industry consultants say insurers are particularly worried about how the AHCA's reduced tax credits for lower income people could erode enrollment.

President Donald Trump leads a listening session with health insurance company CEO's in the Roosevelt Room of the White House, February 27, 2017 in Washington, DC. Trump vowed to fix the problems with the Affordable Care Act.
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"The insurance companies are very worried about this bill," said Robert Laszewski, president of Health Policy & Strategy Associates, a health insurance consulting firm.

"They're going to have to increase rates. Some of them may not participate (in 2018) but there's nothing really to gain at this point by taking on the administration, or the Congress publicly," said Laszewski, adding that behind the scenes, "there's ferocious lobbying going on, on the part of the insurance companies right now, because this is a nonstarter."

Last week, Anthem CEO Joseph Swedish endorsed the GOP plan in a letter to House leaders, obtained by Morning Consult. However, Swedish also said that it was "critically important" to maintain Obamacare cost-sharing subsidies to maintain plan affordability for low-income enrollees.

Once bitten, twice shy

The administration and House Republican leaders stress that the AHCA is just the first step in repealing and fully replacing Obamacare, and that the full plan will come to fruition in three phases.

"It's valid for the administration to talk about regulatory changes that it hopes to pursue, and that's a great conversation to have," said Connolly. "It's a little bit difficult to make business decisions based on unknowns like that."

Meantime, the longer the debate over the GOP health bill lasts, the less time and certainty insurers have to develop plans for 2018. With initial rate submissions due in June, analysts expect the carriers to react much the way they did last year.

"They create some kind of uncertainty buffer in their pricing, so they raise rates," said S&P's Banerjee. "Or … they will decide to drop out and not participate, and come back when there is certainty in the marketplace."

"It's one of those things about once bitten, twice shy," he said.