The famous advice from "Deep Throat" to Bob Woodward and Carl Bernstein still holds true: if you want to know what's going on, always follow the money.
And there are always insights to be gained from the quarterly earnings calls that the publicly traded health plans hold with Wall Street investment analysts. While the discussions are centered around financials, there is generally some good color about how the industry and segments are doing.
The recent year-end earnings releases from the major national insurers provide a telling picture of how the health insurance industry is responding to the (amended and partial) implementation of the Affordable Care Act and other attendant changes in the healthcare industry. Here's a roundup of the major insights:
- The sky hasn't fallen because of ObamaCare, but the big insurers earnings forecasts for 2014 have taken multimillion-dollar hits from the ACA's fees that go into effect this year. Each of the major insurers predicted either lower earnings growth than in past years, or flat earnings for 2014.
- Contrary to the dire predictions of critics, most employers sat tight with their employee insurance plans in 2014 and didn't dump employees health coverage as first predicted and many renewed early in order to avoid ACA requirements for another 10 months or so. Turnover in commercial accounts in January was lower than normal.
- Aetna and Humana didn't get the health insurance exchange enrollment they'd hoped for and say they will probably lose money on their exchange business, despite the rich indemnification provided by the government in the form of stop-loss and other risk protections. WellPoint, which gained 500,000 lives on the exchanges so far, expects to break even on the exchange business in the first year. For the large national insurers, exchange membership will not be large enough to move the needle on overall profitability this year.
- Each of the major commercial insurers is participating in private exchanges, in which employers set a per-employee contribution for coverage and then allow employees to pick among several plans, having them pay the balance. Aetna said it recently had 90,000 self-insured customers switch to a private exchange model, and that it expects to gain 130,000 fully insured members in 2014 through private exchanges a $450 million revenue boost.
- Now that the Centers for Medicare & Medicaid Services is actually close to bringing Medicare Advantage payments to parity with fee-for-service Medicare, insurers are up in arms about the thinning profit margins of their MA business. Every insurer showed deterioration in profit margins of Medicare Advantage, which has become a growth segment in the industry.
- Most Medicaid expansion states were in no particular hurry to add expansion enrollees in January. In the 26 states expanding Medicaid under the ACA, expansion is estimated to add 7 million to coverage. Those new enrollees are on the way, apparently, but the MCOs haven't started serving them yet.
- Medicaid's non-expansion states are even less accommodating to those who discover through the exchanges that they qualify for Medicaid, most are told they have to apply separately through the state Medicaid agency. Medicaid MCOs Molina, WellCare, and Centene are expecting significant enrollment growth in 2014.
- Medicaid MCOs are uneasy about having to bear the cost of groundbreaking and expensive new treatments for Hepatitis C, since most states have not yet addressed the cost in ratemaking.
- Medicaid MCOs say most states will raise their Medicaid reimbursement to cover the cost of the ACA insurer fees shifting part of the cost of the ACA from insurers and onto state and federal taxpayers.
- Humana, UnitedHealth, Cigna, and Aetna continue to tout their cost-control strategy of signing incentive- and risk-based provider contracts, which tie providers pay to measures such as lower hospitalization rates and generic prescribing.
All the companies reported having invested heavily in new systems and products ahead of 2014, and all have been careful to tell investors that they're ready to walk away from market segments or regions where they don't make appropriate margins. And for all the gnashing of teeth over ACA fees and narrow margins for Medicare Advantage, the managed care industry is doing quite well, thanks.