The Future of Health Reform - V - Insurance

Insurance companies often said, in the early days of Obamacare, that the PPACA brought in a lot of patients into the insurance system, but it prevented them from making any money off of them. Is that accurate? Let's find out.

The individual mandate, employer mandate, subsidies on government run exchanges, and expansion of Medicaid drove millions of people to obtain insurance coverage. However, all of the provisions increasing the quality of insurance coverage have increased costs for insurance companies. From the first article in the series:

II. Increasing Quality of Insurance Coverage

A. Essential Health Benefits - all health insurance must provide essential health benefits to its covered members. https://en.wikipedia.org/wiki/Essential_health_benefits

B. Contraceptives & Women's Reproductive Health must be covered

C. Risk management for insurance companies - temporary reinsurance, temporary risk corridors and permanent risk adjustment.

D. Elimination of lifetime coverage caps on essential health benefits

E. Can't drop policy holders when they get sick

F. Out of pocket expenses must be capped

G. Same premium to members based on age, not gender or pre-existing conditions

H. Preventive care, vaccinations and medical screenings cannot be subject to co-payments, co-insurance or deductibles.

I. 4 tiers of insurance coverage: bronze, silver, gold, and platinum.

J. 80-85% of premium costs must go to health care coverage. Rebates must be issue if this is violated.

To understand how insurance companies have fared, let's start with a quick view of the stock prices of major carriers over the last 10 years.

Cigna:

Aetna:

United Health Group:

Pretty good, I'd say.

The fortunes that insurance companies have made me go against the news you have recently been hearing about regarding rising insurance premiums, and insurance companies pulling out of government exchanges.

For many insurance companies, the plans they offer on the exchanges are money-losers. The individuals buying health care on the exchanges are often a higher risk than those receiving insurance through other means. However, due to the restrictions placed on the insurance companies in PPACA, insurance companies are pursuing their options:

1. Raise their premiums to offset the bills they are paying.
2. Leave the exchange altogether in certain states.

When the insurance company leaves the exchange in a certain state, it reduces competition and the remaining companies can increase their premiums as a result.

In 2016, an average of 5.4 insurance companies participated in the exchanges on healthcare.gov. In 2017, 3.9 companies on average are expected to participate in these exchanges.

Overall, health insurers don't want a full scale elimination of the PPACA. Net, it looks positive for these companies. Most importantly, they don't want the new administration to dismantle the wrong elements of the law - i.e. the individual mandate or employer mandate. However, they would be open to seeing a different implementation of the exchanges, which are not as profitable for the insurers as they would desire.



Sources:

Health insurers list demands if Obamacare is repealed

Exchanges three years in: Market variations and factors affecting performance

Why Some Obamacare Insurers Are Making Money, But Many Are Losing Big

No, Obamacare isn't killing the insurance industry