The administration touted a bump in new ObamaCare sign up numbers, but Humana said it expects the risk pool to be disproportionately sicker, further increasing cost far more than anticipated. The cause of the increase in directly due to the president’s politically motivated decision to allow healthier people keep their existing plans.
When it became clear that President Obama misled the American people when he said, “If you like your plan, you can keep your plan, period,” the administration began implementing a series of delays and temporary exemptions in an attempt to arrest the free fall in the president’s approval ratings.
According to Humana, there will be consequences for the president’s political decisions, and that consequence will be higher cost that ultimately will be passed on to the American people.
The ObamaCare sign up numbers will be swamped with enrollees who will be “more adverse than previously expected,” Humana said in a regulatory filing. To calm investor fears, the company adamantly reassured their 2014 profit forecast, but the Louisville, Kentucky-based health insurer said it was evaluating expectations for the new year.
Experts and insurers said at the time the president made his political calculation that it would cause “tremendous instability” in the insurance market by allowing younger, healthier customers to either opt out of ObamaCare or temporarily keep or purchase “catastrophic” coverage.
“Humana was already assuming the exchange business would be unprofitable,” Carl McDonald, a Citigroup analyst, wrote in a note to clients today. “It now appears Humana believes it could lose even more money because the mix of exchange enrollment is less favorable than anticipated.”
The company also said it expects harsher cuts to Medicare Advantage, which Gov. Romney warned about during the 2012 presidential election. The program pays private insurers to provide benefits to the elderly. The government will announce their proposed payments for 2015 plans next month, which Humana now estimates will be cut by 6 percent to 7 percent, up from the initial 4 percent to 5 percent initial projection.
Humana reiterated its 2014 earnings forecast of $7.25 to $7.75 a share. The company sees sales and enrollment ahead of expectations for Medicare Advantage plans this year, as well as for Medicare prescription drug plans.
Because Humana offers pricier plans with more generous coverage, it’s unclear if insurers who offer coverage with less generous benefits are experiencing similar issues, forcing them to pass cost of to the consumer.
“It’s worth asking the question of whether Humana believes the entire exchange risk pool is worse than anticipated,” McDonald wrote. If the problem is on a grand scale, an insurance death spiral will become a serious concern.
Including companies who offer more and less generous coverage nationwide, as of the first week in January, only 5 – 15 percent of those who selected a plan on either the state or federal exchanges have paid their first premiums. Among those who did pay, the vast majority are plans with more generous coverage, suggesting the consumer is in need of such coverage.
The data suggest the issue is not specific or unique to Humana, but rather underscores a common challenge throughout the country to the entire system.
