As enrollment grows from the second year Americans can sign up for private coverage under the Affordable Care Act, health insurance companies are hinting at a 2015 that will also be lucrative to their bottom lines.
Just last week, Anthem (ANTM) surprised some by once again raising its financial guidance for 2014. This comes just two weeks before the company plans to release its fourth quarter and full-year profit report for last year and its outlook for 2015.
This means – for the fifth time in about a year — the former Wellpoint has told Wall Street it would make more money than originally thought. When companies do this, they are saying they are on a roll and Anthem raised its earnings guidance four times last year.
Anthem executives said it expects full year 2014 “adjusted net income” to be $8.85 per share, which is up from a forecast issued in October that said net income would be in a range of $8.75 to $8.85 per share.
Though Anthem hasn’t made such pronouncements about 2015, others aren’t entering the new year on cautious notes. Aetna AET -0.23% (AET), for example, last week raised its membership forecast for 2014 from what it originally expected and affirmed its earnings forecasts for both 2014 and 2015. Another barometer of health plan earnings will be out later this week when insurance giant UnitedHealth Group UNH +0.07% (UNH) reports its fourth quarter and 2014 earnings and issues a forecast on Wednesday.
In addition to increased enrollment from the health law, part of the positive forecasting for the rest of 2014 comes with the flu season not turning out as bad as predicted and health insurance companies like Anthem and others negotiating better price deals on the expensive Hepatitis C pills sold by Abbvie (ABBV) and Gilead Sciences GILD +3.11% (GILD).
The potential cloud hovering over all health insurance company earnings for later in 2015 comes should the U.S. Supreme Court late this spring issue a complicated ruling that could eliminate subsidies for certain Americans who bought private insurance on the federally run exchange. The case, King vs. Burwell, looks at whether wording in the health law disqualifies states that didn’t establish their own marketplaces, or exchanges.
But at least some analysts aren’t so sure the Supreme Court will side with opponents of the law given estimates showing up to 10 million people purchased coverage on federally-run exchanges.
“The Supreme Court rules in favor of premium subsidies through the federally facilitated marketplaces as Chief Justice Roberts recognizes the political bind striking these subsidies would be for Republicans going into 2016,” Sterne Agee analyst Brian Wright said in a commentary discussing key health issues in 2015.
If the court rules to eliminate the subsidies for those who purchased on the federal exchange, subsidized enrollment would fall to 4.1 million from 13.7 million, according to a RAND Corp. analysis out earlier this month.