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Life Health > Health Insurance

Earnings: More PPACA impact news drips out

By Allison Bell

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Aetna Inc. (NYSE:AET) and Centene Corp. (NYSE:CNC) released fourth-quarter earnings announcements today, and they increased the amount of public information about the effects of the Patient Protection and Affordable Care Act (PPACA) a smidgen.

UnitedHealth Group Inc. (NYSE:UNH) kicked off earnings season by noting that it still expects to get a profit margin of about 1 percent to 2 percent from its exchange qualified health plan (QHP) business, without use of the complicated, mysterious PPACA “three R’s” risk-management programs.

Anthem Inc. (NYSE:ANTM) seemed to imply that its exchange QHP profit margins might be somewhere between 4 percent and 5 percent.

The comments that Aetna and Centene executives made today during their companies’ fourth-quarter earnings were less concrete.

Aetna is reporting a total of $232 million in net income for the latest quarter on $15 billion in revenue, compared with $369 million in net income on $13 billion in revenue for the fourth quarter of 2013. The company ended the year providing administering health coverage for 23.5 million people, up from 22.2 million people a year earlier. Commercial enrollment increased to 20 million, from 19 million. The company had about 560,000 exchange QHP enrollees at the end of the year and might have about 800,000 exchange QHP enrollees by March 31, executives said.

Aetna says earnings were down partly because of increased spending on growth initiatives, and partly because of lower margins on exchange QHP business. 

Centene is reporting $105 million in net income for the latest quarter on $4.7 billion in revenue, up from $53 million in net income on $2.9 billion in revenue for the year-earlier quarter. The company has about 4.1 million health plan enrollees, up from 2.9 million a year earlier. About 75,000 of its enrollees are in exchange QHPs.

For a look at what the companies’ executives said about the effects of PPACA, read on.

1957 Cadillac

1. The Cadillac plan tax is here.

Mark Bertolini, Aetna’s chairman, said the Cadillac tax — a PPACA provision that is supposed to require issuers of the insurance in high-value employee health benefits packages to pay an excise tax on the insurance value — is already having an effect on negotiations involving large employers and 5-year labor agreements.

Image: Dorling Kindersley.

Zipped mouth

2. Insurers are still not giving many details about PPACA exchange plan performance.

Michael Neidorff, chairman of Centene, said only that, “The financial performance of our exchange business was slightly ahead of our projections.”

Centene was selling exchange QHP coverage in 2014 and is selling exchange QHPs in 11 states this year.

At Aetna, Karen Rohan, the company’s president, said the company is “quite pleased with the results to date on exchange.” Mark Bertolini, the chairman, said the company still has to make too many estimates about the effects of the PPACA risk corridors, reinsurance and risk-adjustment programs to say anything about whether exchange QHP business will be more profitable this year.

Company executives said they believe the company qualifies to get a small risk corridors program payment but that they took the receivable about of the latest earnings report because of concerns about collectibility.

“I think we’ll be in the middle to second half next year when we actually get the real data,” Shawn Guertin, Aetna’s chief financial officer, said.

Machinery

3. Executives at publicly traded companies outside the health insurance industry aren’t saying much about PPACA during their own fourth-quarter earnings calls.

Executives at Manpower, one big human resources company, said nothing about PPACA during its earnings call.

Patricia Little, chief financial officer at a Manpower a competitor, Kelly Services, said only that “discussions with our customers about the costs associated with compliance with the Affordable Care Act have gone well.”

Kelly Services does not expect PPACA to hurt its profit margins, Little said.

Man jumping over hurdles.

4. The private exchanges may be facing startup challenges of their own.

Aetna is investing to create new private exchange capabilities for its group health customers, but Bertolini said employer use of private exchange programs was lower than Aetna had expected.

But Aetna is still having many discussions with large and midsize employers about private exchange programs and sees strong interest in the topic, executives said.

See also: 3 PPACA World field reports.

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