The big, publicly traded health insurers have now released some data for all of 2015, and more numbers are available for the first three quarters of that year.
Looking at the 2015 numbers gives credit analysts, market analysts and other analysts their first chance to make year-over-year comparisons showing how health carriers are doing under the underwriting rules, product mandate rules, and other Patient Protection and Affordable Care Act (PPACA) rules and programs that took effect in January 2014.
Just nine months ago, insurers were still hoping that three huge PPACA risk management programs — a temporary individual health insurance reinsurance program; a temporary risk corridors operating margin protection program; and a risk-adjustment program — might smooth over any PPACA World startup problems.
Insurers now know that the risk corridors program worked very poorly in 2014; the reinsurance program probably raised less cash than expected but had enough to meet its obligations, due to program eligibility rules that excluded the many grandfathered and grandmothered individual policies still in force in 2014; and the risk-adjustment program is still something of a mystery, but appears to have problems.
In spite of those concerns, credit analysts at Moody’s Investors Service and market analysts at Mark Farrah Associates say the big insurers still look healthy. For a look at some of their reasons for that diagnosis, read on.
The Moody’s analysts, who influence what interest rates insurers pay when they borrow money, say their overall 2016 outlook for U.S. health insurers is stable.
The individual commercial business of some of the insurers appears to be suffering from soft enrollment growth and a relatively old, sick risk pool, but the carriers Moody’s rates reported net earnings of 3.3 percent for the first three quarters of 2015, and 4 million of the 5.3 million enrollees they added were in Medicaid and Medicare Advantage plans, the analysts say in a commentary explaining their decision to describe the health insurance sector outlook as stable.
Group commercial plan enrollment appears to be stable, Medicare Advantage enrollment appears to be higher than expected, and the insurers have done a good job of expanding outside the sectors governed by PPACA and other medical insurance regulatory regimes, the analysts say.
However, the analysts say one possible negative factor could be poor individual major medical plan results.
If the individual policies do very poorly, and the federal government starts some kind of new health insurance agency to compete with private health insurers in the individual market, that would be a “very negative” development for the sector, the analysts say.
(Image: LHP/Allison Bell)
Mark Farrah analysts track Aetna Inc. (NYSE:AET), Cigna Corp. (NYSE:CI), Health Care Service Corp., Humana Inc. (NYSE:HUM), Kaiser Permanente, UnitedHealth Group Inc. (NYSE:UNH) and Anthem Inc. (NYSE:ANTM).
Humana lost about 10 percent of its plan administration enrollment between Sept. 30, 2014, and Sept. 30, 2015, and Aetna and Cigna saw fully insured enrollment shrink about 3 percent to 5 percent, but overall, the seven companies’ major medical enrollment increased 2.4 percent, to 147 million, according to Mark Farrah data.
The number of fully insured enrollees increased more than 6 percent at UnitedHealth, Kaiser and Humana, the firm’s analysts say.
The analysts also have profit figures for the first three quarters of 2015 from Aetna, Anthem, Kaiser and United Health.
Those four insurers had an average operating profit margin of about 4 percent for the third quarter. That was down from more than 5 percent in the third quarter of 2014, but it was still positive. Kaiser, which saw its operating profit margin fall to 4.2 percent from 7.3 percent, was the only carrier that reported a sharp drop in its operating profit margin between the third quarter of 2014 and the third quarter of 2015.
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