High individual health claim costs at nonprofit Blue Cross and Blue Shield companies in the recent past could be good news for big, for-profit, publicly traded health insurers in 2017.
Brian Wright, a health care services securities analyst at Sterne Agee CRT, comes to that conclusion in a new comment on a batch of 2014 and 2015 individual health experience data that the Blue Cross and Blue Shield Association released Wednesday.
In the Blues’ report, which was released as the carriers were heading into a big Patient Protection and Affordable Care Act (PPACA) risk-adjustment program methodology policy meeting that was set to be held Thursday in Baltimore, the Blues provided member company data showing that consumers who have signed up for individual health coverage since new PPACA underwriting restrictions and benefit plan design requirements took effect in January 2014 tend to be more likely to have costly health problems than consumers who signed up for individual health coverage under the pre-PPACA underwriting and plan design rules.
“The findings were not surprising,” Wright writes in the commentary. “However, we believe the report is an indication that the nonprofit Blues have suffered enough losses in this product and are likely to significantly raise prices for 2017.”
If the nonprofit Blues plans increase their prices, that should give Anthem Inc. (NYSE:ANTM), Aetna Inc. (NYSE:AET) and UnitedHealth Group Inc. (NYSE:UNH) charge higher prices for any individual health products they sell in 2017, Wright says.
If big, well-known commercial plans charge higher prices for individual coverage, that may help Molina Healthcare Inc. (NYSE:MOH) and Centene Inc. (NYSE:CNC), PPACA exchange plan issuers that are better known for managing Medicaid plans, attract more of the lower-income exchange program users who are coming into the exchange program from Medicaid, Wright says.
“Given the highly subsidized nature of this population and how the [PPACA exchange] subsidy levels are calculated, we do not see adverse selection risk as seen in non-subsidized insurance markets,” Wright says.