What part of the ACA, specifically, requires an insurer to offer a service below cost?
There’s a reason why insurers get to set their own rates (within the limits of state laws) and have quite a bit of control over their expenses.
And Members of Congress and most members of their staff are required to obtain their coverage through the ACA exchanges, while virtually all of the executive branch employees are covered through the ACA-compliant federal employee benefits program.
In other words, pretty much nothing in your post withstands scrutiny.
However, as both your cites acknowledge, insurers who can justify their rate increases are not prohibited from increasing rates, nor are they required to sell plans for less than cost.
The Obama Administration’s “pressure,” per your cite, consists of a letter from HHS asking state officials to carefully consider recent data, including health care cost trends and newer claims data, while making final decisions on whether proposed rate increases are justified. Meanwhile, the ACA’s enhanced rate review powers mostly come down to a requirement that the state “must receive sufficient data and documentation concerning rate increases to conduct an examination of the reasonableness of the proposed increases.” [The data includes information such as enrollment trends, changes in utilization of services, cost-sharing changes, medical inflation rates, impacts of over- or under-estimates in previous years, etc.]
There’s an enormous amount of subjectivity in calculating required rate increases. Estimates of the key assumptions can vary a lot.
If the state commissioners, responding to cues from the Obama administration, take an aggressive approach to these assumptions, that would put the squeeze on the insurers unless the most optimistic assumptions happen to play out.
So, because UH is making so much money (because it sets its rates such that it is profitable), it plans to exit the business? makes perfect sense to me!:smack:
UH set its own rates. UH made bad assumptions and/or bad marketing decisions and set its own rates too low. What does any of that have to do with UH being forced or compelled to set its rates at any particular level? Yes, :smack:
Let’s examine your assumption that the insurance commissioners would respond to inappropriate cues from the administration (any administration).
Most state insurance commissioners in the U.S. are either elected directly or appointed by somebody who is elected directly (frequently, the governor). In none of the 50 states does the federal government have any role in selecting or supervising said office. What’s the incentive to kow-tow to Washington, particularly given that these same commissioners are going to have to face the voters (or the boss who faces the voters) after putting the squeeze on insurers such that too many insurers exit the state?
For example, the Kansas Insurance Commissioner is elected, and every four years he’s out stumping for campaign cash from Blue Cross, et al. What would be his motivation to take an aggressive approach to assumptions driving rate increases?
Further, what would be the Obama Administration’s motivation to encourage overly-aggressive approaches? Consider that the ACA is perhaps the signature achievement of his presidency, and if it fails, even after he leaves office, that’s a hell of a legacy.
In any case the claim that the ACA forces any insurer to offer a service for below cost is pure bullshit.
If someone wants to claim that it is possible for a government agency that has power over rate increases (be it in health care or for electrical power) to refuse increases that a company needs to not lose money, then yes, such is theoretically not impossible. But it is not happening and has not happened and claiming that it is happening is facile.
Again, F-P look to your wisdom of the markets … since the ACA passed the market has double or tripled the value of health insurance stocks.
Aetna, for example, has been raising its expected profits “and said ‘moderate’ medical costs boosted the profitability of its government Medicare and Medicaid plans.” EPS is increasing steadily.
Of course there is some conflation going on here … using “Obamacare” or the ACA as somehow equaling the individual exchange marketplace. Obviously the individual exchange marketplace is only one small part of the system. Again, UNH was never seriously playing in the space and those companies who have been are still portraying the individual exchange segment as a growth opportunities.
It is easy to forget that the individual exchange is only one small part not only of the overall insurance market but ofthe increase in the number insured because of the ACA;
But it is fun to imagine what happens if Chicken Little was right and the sky really was falling o the individual exchange market. Is it the death of the ACA? No. It might possibly however lead to some pressure to expand government sponsored alternatives for those who need individual plans. I can imagine an option of either paying the penalty or paying slightly more and being able to participate as a voluntary member of an expanded Medicare system, for example. Won’t happen but as much as any other reason because most of the insurers want this business and they believe (and the market believes) it will be profitable for them.
There are more people per year, and they are more likely to be healthy and without insurance, yes. But there are just more gross uninsured people in the typically less healthy demographic.
If 100% of people in the 18-35 group were healthy, and without insurance, but there were only 100 of them, and only 5% in the less healthy group were without insurance, but there were 5M of them, that’s important. The gross number of people in this scenario is important.
I think more healthy people need to sign up at the exchanges to make them viable. It’s a toss up in my mind if that’s going to happen.
[ol]
[li]The stock market as a whole has increased signicantly since the ACA was passed, and a big portion of the increase in health insurance stocks is related to that.[/li][li]As you’ve noted, the ACA relates to more than the exchanges.[/li][li]The stock market prices future expectations more than current status. As long as expectations were than the exchange business will ultimately be profitable, the markets will price insurers higher even if they’re currently losing money on the business. (That’s why tech stocks and recent start-ups frequently have sky-high valuations even if they’ve never made any money.) If the UHC announcement turns out to be the beginning of a shift of opinion on future prospects, those prices would likely decline.[/li][/ol]
I’ve cited earlier that the insurers on the exchanges have collectively lost $2.5B over the course of its existance. You’ve been happy casually declaring things you don’t like to be “pure bullshit” and the like but have not gotten around to responding to that.
Because otherwise he risks being depicted (by Obama administration publicity) as being responsible for high rates that the public has to pay.
Because the exchanges also fail if the rates are too high. That would discourage people - and especially healthier people - from signing up. And since Obama promoted the ACA on the basis of the notion that they would lower rates, and since lower rates are always more popular in the short term, they are biased to that side.
I’m sorry, I didn’t mean that the Obama people were going to specifically call out insurance commissioners by name (although that’s a risk too). But by the Obama people calling on state insurance commissioners to keep a lid on the rates, this creates the perception on the part of the public that to the extent that rates are too high it’s because the insurance commissioners were not aggressive enough in their rating approvals. (Especially if you consider the possibility of journalists and advocates joining in.)
I would have thought this is pretty self-evident. I mean, there’s a reason the Obama people are writing these letters, and it’s not because they expect the insurance commissioners to casually toss them into the circular file - they expect them to be taken seriously. Do you disagree with this?
Several things:[ol]
[li]The S&P is up about 90% and the Dow 70% since the ACA was signed. Yup significantly up. Meanwhile Anthem is up 145%, Aetna 260%, and Cigna 460%. The insurers have way outperformed the market.[/li][li]Indeed the Exchanges are a small part of the ACA and of “Obamacare”.[/li][li]No question that the insurers are not making money during year one in the individual exchange market. But yes the point is that the marketplace has bet big that the Obamacare in general, inclusive of the individual exchanges, will be profitable for them.[/li][li]The complete industry losing $2.5 billion on the product line in year one sure does seem like a lot of money … until one realizes that United Healthcare alone has had $1.46 trillion in revenue over the last rolling 12 months. That loss across the complete industry is essentially chump change on that scale.[/li][li]The industry is meanwhile still making plenty of money.[/ol][/li]
So the circumstance remains that of the big insurers UNH has been and remains the odd one out, having been hesitant to seriously compete in the product line and quick to pull back some from it, albeit not willing to not play at all. The other big players perceive that the individual exchanges are future growth opportunity and have been investing in being positioned in the space. Will their investments pay off? You obviously have your read of the crystal ball. The issue of this thread remains that UNH’s one month’s exuberance for how quickly they’d make money off of this and next month’s pessimism and hanging crepe informs little of what the future will be. The others are all seeing what they expected to see, are willing to invest in what they see as a vehicle for long term growth, and have seen no need to correct previous earnings guidance, which is growing nicely.
[ul]
[li]Your UHC revenue number is apparently off by a factor of 10. UnitedHealth Group Incorporated (UNH) Valuation Measures & Financial Statistics seem to be conflating revenue with profit/loss.[/li][li]Most importantly, the discussion here is not about whether these companies will go bankrupt. Exchange business is a small part of their business at this point, and they can easily make of their losses on the exchanges with profits elsewhere. But this discussion is about whether the exchanges specifically will be profitable. You’ve been arguing that UHC’s losses are the result of them doing a bad job of their exchange business, and the fact that the industry as a whole lost money undercuts that argument.[/li][/ul]
Indeed I misread and my apologies. Thank you for catching it … the point however still stands: the stated complete industry’s loss on the marketplace since its go-live in January '14 is about 1.7% of just UNH’s rolling annual revenue alone.
It does seem that we both realize that Obamacare in general has been very very good for the insurance industry.
You however have misunderstood what I am saying. I have no idea how much loss UNH had versus how much loss Aetna, for example, has had. What I do know is that UNH has not been as seriously building the infrastructure needed to succeed at many levels. They entered the individual exchange marketplace timidly at best. In October, 22 months into the individual exchanges going live, they were bullish on their long term future in the individual exchange market and were talking about expanding into 11 new exchange markets during 2016, yet one month later were reversing course. No one else has misread like that. No one else is having to revise guidance downward.
I don’t know if their losses are more or less than the others, but their one month transformation from bullishness to bearishness about the exchanges, their sudden downward guidance correction, reflects an ineptness in this regard that seems to be theirs alone. The others have been and continue to be cautiously optimistic, seeing the progression pretty much where they were predicting it to be.
I do want to clarify … personally I do not subscribe to the wisdom of the marketplace as the be all and all. The point of pointing out, oh things like that YTD the S&P is up 1% while Cigna and Aetna are up 11 and 16% respectively all while they invest in the exchanges and initially lose money on them, is not that it must therefore be true that the individual market exchange is going to make them oodles of money in the future, or even be viable long term, but to dispute the claim that a single of day broad healthcare industry drops after UNH’s revision of their earnings guidance in any informs.
I wouldn’t say that. I am aware that expectations of future enrollment increases have helped insurance company stock prices, but I’m not aware of any significant way that the ACA has helped actual insurance industry profits.
If anything, they’ve probably been helped a lot more by the downturn in healthcare trend which began around the same time as the recession and is probably attributable in large part to it, along with the increasing prevalence of high deductible plans.
Yet. The fact that others have not done this yet doesn’t mean that they won’t. The question of whether the UHC is a predictor of the future of exchanges in general is the central question of this thread, and it doesn’t make sense to prove that that it’s not a bad sign for the exchanges from the fact that they are the only ones to reverse course to this point.
It may be that they will be the only ones or it may be that they will be the first of many.
I certainly agree that the market is not the “be all and end all”. Nonetheless it’s a data point, and I made that observation in conjuction with an observation that analyst commentary (also not a “be all and end all”) also tended to think it was an industry issue and not specific to UHC. In that context, the reason one day is more important that YTD (or even the 5 day average you noted earlier) is because the one day reaction is much more highly focused on the specific issue of the exchanges and are more of a reflection of the market assessment of the exchange business specifically, while longer term reactions reflect a whole lot of other things going on.
All that said, the markets and the analysts could all be wrong. No doubt. I just brought that up as something worth noting, as a counterpoint to all the talk of just how incredibly inept UHC is that were being so confidently bandied about in this thread.
Volume is a large part of it. Employer sponsored insurance plans increased by 8.2 million.
Okay, lots of the volume increase is arguably not directly tied to Obamacare: 16.5 million Medicare and 33 million Medicaid beneficiaries are in insurance company plans.
It is however also arguable that the ACA has been part of the driver of that process.
It is not higher profit margins that drives higher profits. That’s Aetna’s overall flat to decreasing profit margin graph. Here’s Anthem’s. UNH’s. Not every company exactly the same but the theme is clear. Less profit margin on much higher volume equals more absolute profit.
Again … everyone else has been consistent. They have not suddenly said how great nor suddenly said how crappy. After UNH’s sudden take-back into pessimism the others came out and reassured that they were right were they had expected they’d be with the numbers already baked into previously stated earnings guidance. They are the only ones to have gone all over the place with their assessments. Yes it makes sense to say that they alone have been particularly inept in that regard, in the regard of predicting what the exchange business is going to look like even one month more into the future. It is also their track record … they had pulled out of Medicare Advantage and Medicaid and then re-entered … and see above for how big of a book of business that is.
I didn’t know you were referring to actual letters. Earlier you seemed to be talking about hypothetical ones. But yes, I disagree. The Administration has no authority over state officials and no business doing anything other than asking them nicely to do X or Y.
FWIW I would think the Medicaid is related to the Medicaid expansion which was part of the ACA, and the employer side is related to the additional jobs in the economy, which was not.
You seem to be correct that this has been the case here, and contrary to my earlier speculation.
No idea where you got that impression. When I first brought this up I linked to an article about the actual letters.
In a theoretical, division of powers sense, yes. Real world, no.