As still more health insurers and health care providers release third-quarter earnings, more company executives are talking about what the world shaped by the Patient Protection and Affordable Care Act (PPACA) is really like.
Some hospital companies have pointed out that PPACA-driven decreases in the uninsured rate seem to have stalled.
Some carrier executives say claims still look terrible.
But Samuel Hazen, president of operations at HCA Holdings (NYSE:HCA), a big hospital company, emphasized that the company’s relationships with commercial payers look about the same as they have looked in the past.
Uninsured rates may be creeping back up, and some patients may face higher out-of-pocket costs, but, in general, “there is nothing to suggest that the economy across HCA’s 42 markets has dramatically changed, or that any other competitive dynamic has had an impact on our business,” Hazen said.
The number of commercially insured businesses increased 2 percent in the third quarter, and that looks like a good sign, Hazen said.
Even some carrier executives said they were happy with how their own companies’ blocks of individual health insurance have been doing.
1. A carrier with conservative pricing is happy with how the market looks.
In the past, Centene focused on competing hard for big managed Medicaid plan contracts with narrow anticipated profit margins.
The company is reporting $93 million in net income for the latest quarter on $5.8 billion in revenue, compared with $82 million in net income on $4.4 billion in revenue for the third quarter of 2014.
William Scheffel, chief financial officer at Centene, said his company’s experience has paid off in the PPACA exchange market.
“We were very conservative going in,” Scheffel said.
In part because the company took a conservative approach to pricing and product design, the company’s exchange business has performed better than the company expected both in 2014 and in the first three quarters of 2015, Scheffel said.
U.S. Department of Health and Human Services (HHS) officials recently said the PPACA risk corridors program, a program that’s supposed to use cash from thriving exchange plan issuers to help struggling issuers, may get enough cash from thriving issuers to pay only about 13 percent of the cash owed to struggling issuers.
Centene doesn’t have to worry about the risk corridors program funding shortfall because it’s one of the thriving issuers expecting to have to pay into the program, Scheffel said.
Executives implied that their exchange plan business has profit margins in the 3 percent to 5 percent range.
2. A carrier used to the traditional individual major medical market would just like to see its current level of misery stabilize.
Executives at Assurant, a company with subsidiaries that helped create the modern U.S. commercial health insurance market, have already announced plans to shut down the company’s individual health insurance business at the end of the year.
The health unit posted a $144 million net loss for the third quarter, compared with a $17 million net loss for the comparable quarter in 2014. Assurant is hoping to get $161 million from the PPACA risk-adjustment risk management program for 2015 and $208 million from the PPACA reinsurance program. It’s already received $329 million in PPACA risk management program payments this year from the Centers for Medicare & Medicaid Services (CMS), an arm of HHS, and it hopes to get about $28 million in the fourth quarter.
This year, health claims are about 30 percent higher than they were a year ago, and the individual health unit is doing so poorly that the company plans to infuse $200 million into the unit to to make sure it can meet obligations to policyholders, executives said.
“We are evaluating alternative options to limit the length and expenses associated with the wind down period,” Christopher Pagano, the company’s CFO, said.
“The important thing here is that we’re honoring all of our obligations to policyholders as we wind down this business,” Alan Colberg, Assurant’s president, said.
3. Anthem is still waiting for some of the other carriers to raise premiums to what it believes to be a rational level.
Anthem is reporting $2.4 billion in net income for the quarter on $59 billion in revenue, compared with $2.1 billion in net income on $55 billion in revenue for the third quarter of 2014.
Individual enrollment fell to 1.7 million, from 1.8 million a year earlier.
Executives said their individual health insurance business is still profitable.
But Joseph Swedish, Anthem’s president, said individual enrollment is lower than expected, in part because of “unsustainable pricing by some of our competitors.”
Wayne DeVeydt, Anthem’s CFO, said Anthem hopes “pockets of industry pricing that we just don’t believe is sustainable” will go away by 2017 and 2018.
“We are going to need to be patient,” DeVeydt said.
Two of the PPACA risk management programs, the reinsurance program and the risk corridors program, are supposed to dismantle in 2017, and that could help improve the pricing situation in 2017, DeVeydt said.