3 Reasons Why Obamacare’s Outlook Is Rosy for Insurers

Insurance company earnings reports from the first quarter of the year offer a peek into the future of the Affordable Care Act.

Joe Swedish (2R), chief executive officer of Wellpoint Inc., and others walk to the West Wing of the White House on November 15, 2013 in Washington, DC. Obama met with health insurance industry leaders to discuss allowing consumers to re-enroll in plans that had been canceled because of the Affordable Care Act.  
National Journal
Clara Ritger
April 30, 2014, 7:06 a.m.

Well­Point re­por­ted bet­ter earn­ings than ex­pec­ted Wed­nes­day for the first quarter of 2014, adding to the grow­ing list of health in­surers show­ing pos­it­ive out­looks for the fu­ture of the Af­ford­able Care Act’s ex­changes.

The Blue Cross Blue Shield health in­sur­ance com­pany, which of­fers plans on Obama­care’s ex­changes in 14 states, upped its an­nu­al earn­ings per share pro­jec­tions by 20 cents to $8.40.

On a call with in­vestors Wed­nes­day about the com­pany’s out­look, Well­Point CEO Joe Swedish iden­ti­fied three reas­ons that the Af­ford­able Care Act is pan­ning out as in­surers ex­pec­ted.

1. The vast ma­jor­ity of people are pay­ing their premi­ums.

The rate of people who se­lect a Well­Point plan and then pay the premi­um to be­gin cov­er­age is hit­ting about 90 per­cent, Swedish said. That could change, be­cause the cus­tom­ers who pur­chased cov­er­age at the end of the open-en­roll­ment peri­od aren’t in­cluded in Wed­nes­day’s earn­ings re­port. But the com­pany said 400,000 people signed up for its ex­change plans through Feb. 15, and it an­ti­cip­ates its total to top 600,000.

2. Well­Point is see­ing an over­all bump in its num­ber of cus­tom­ers.

“We’re win­ning a lot of new mem­bers, and wheth­er they had in­sur­ance pre­vi­ously or not, we do not know,” Swedish said.

The com­pany also re­por­ted good re­ten­tion from year to year of people who were already Well­Point cus­tom­ers. While Swedish couldn’t tell wheth­er there was an in­crease in the up­take of em­ploy­er-sponsored in­sur­ance due to the Af­ford­able Care Act, the com­pany has no­ticed a de­cline in the num­ber of cus­tom­ers who typ­ic­ally drop off of em­ploy­er plans.

Well­Point covered an ad­di­tion­al 1.3 mil­lion people in the first quarter and pre­dicts that it could double that by year’s end.

3. The newly in­sured are older, eli­gible for sub­sidies, and buy­ing cheap­er plans.

Well­Point says 80 per­cent of its cus­tom­ers are sub­sidy-eli­gible, and that its most pop­u­lar plans are rated sil­ver and bronze. That’s con­sist­ent with United­Health Group’s re­por­ted en­roll­ment, which the in­surer re­leased earli­er this month with its first-quarter earn­ings.

Ex­change cus­tom­ers are trend­ing older, Swedish said, which the com­pany ex­pec­ted when pri­cing the plans.

“The age of our ap­plic­ants de­creased the fur­ther we got in­to the open en­roll­ment,” Swedish said, “in­dic­at­ing that young people signed up later in the open-en­roll­ment peri­od.”

Well­Point didn’t of­fer much in­sight in­to 2015 premi­um pri­cing. The com­pany’s ex­ec­ut­ives ex­plained that some factors have yet to pan out, such as the makeup of the pool of cus­tom­ers who are able to sign up after the open en­roll­ment, as well as what new reg­u­la­tions and guidelines the ad­min­is­tra­tion may hand down to change the fin­an­cial out­look for the in­sur­ance in­dustry.

But the com­pany wasn’t tout­ing double-di­git premi­um in­creases in 2015, which it has pre­vi­ously done. In­stead, the com­pany wavered, say­ing premi­ums would vary by mar­ket. That’s con­sist­ent with health in­surer Aet­na’s out­look, un­veiled dur­ing its earn­ings re­port call last week.

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