Coronavirus Drives Health Insurers Back To Obamacare

Health insurers fled the Affordable Care Act in the early years of the law, fearing that losses from covering too many sick people would eat away at their profits.

Now the insurers increasingly view Obamacare as a boon while job-based health coverage faces its biggest threat yet in a crashing economy.

With tens of millions of people losing their jobs — and their health benefits — along with major cuts to Medicaid, the insurers see stability and the promise of enough healthy enrollees in a marketplace that offers government subsidized private insurance to millions of Americans during a pandemic.

United Healthcare, the nation’s biggest insurer, on Tuesday said it’s re-entering Maryland’s Obamacare market and planning other expansions after abandoning 34 states’ ACA exchanges since 2016. Anthem and Cigna have also made incremental moves over the past two years.

A just-released study from the Kaiser Family Foundation found insurers serving Obamacare patients saw continued profits last year, and that there were no signs that the elimination of the law’s individual mandate, which took effect in 2019, led to a widespread exodus of healthy customers.

“This business is as vital and viable as it’s ever been,” Centene CEO Michael Neidorff told investors, referring to the overall health insurance market, when he raised the company’s revenue forecast for this year, even with unemployment reaching levels not seen since the Great Depression. The company started out as a niche player administering Medicaid benefits and has gradually expanded into Obamacare.

The insurers’ strategies mark a major turning point after years of volatility for the law – and a further sign of how ACA marketplaces continue to grow and serve more people while Republicans and the Trump administration press a federal lawsuit that could end the program. And as the clash between the politics and the health care realities becomes more stark during the pandemic, some industry watchers see and added incentive for insures to go all in backing the law in anticipation of a Democrat winning the White House this fall.

Almost 27 million Americans could lose their job-based overage due to the pandemic, according to Kaiser. Few will be able to sign up temporary workplace insurance, known as COBRA plans, which is costly without employer subsidies that typically cover the lion’s share of monthly premiums. That leaves the Obamacare markets or Medicaid, which may not be available to many of the poor in the 14 states that have not expanded the programs under the health law, and will likely face cuts as states tighten budgets in response to the crisis.

Obamacare plans are more attractive to insurers than Medicaid business, because they typically can charge high deductibles and copays and count on paying out less in claims for all but the sickest patients. That model seems to be holding up in even the early weeks of the pandemic.

“There is growing taste for subsidized business,” said Kathy Hempstead, a health insurance expert at the Robert Wood Johnson Foundation.

The insurers are portraying Obamacare as a safe harbor as economic fallout from the pandemic threatens job-based health plans that drive their biggest profits.

“In the coming months, millions of individuals are expected to turn to the ACA exchanges in order to secure coverage,” the lobby group America’s Health Insurance Plans told the Supreme Court Wednesday in a brief urging justices to rule against the GOP-led lawsuit to invalidate Obamacare.

It’s a big shift from the early years of the health law, when many insurers fled the ACA marketplaces, spooked by huge losses stemming from higher-than-expected claims. Then more uncertainty followed as the GOP-led Congress mounted a futile effort to repeal the law and President Donald Trump ended a crucial subsidy to offset health plan losses.

But more recently, some of the health plans have concluded that Obamacare is a safe and stable business, in part because people with pre-existing conditions have guaranteed access to coverage under the ACA. Anthem after exiting a slew of markets in 2018, started building up its Obamacare business again in 2019 and 2020. Cigna spent three years scaling back before re-entering over the past two years.

Now with a pandemic accompanied by a massive unemployment crisis, insurers can net up more newly jobless Americans, as well as a new chunk of the currently uninsured.

Anthem CEO Gail Boudreaux told investors late last month that the economic fallout from the pandemic may drive an “unprecedented shift” of people from workplace insurance to Medicaid and Obamacare rolls and that the company is “quickly reallocating resources” to help people make the move.

“The puck is going to those places,” Hempstead noted. “That whole [employer] sector is shrinking. You have to go where people are going.”

There is also, she said, a political incentive for insurers to position themselves behind the ACA as many Democrats embrace bigger government expansions into health care, possibly including a public option that can compete with private plans.

One unknown is what happens to small businesses that buy coverage for their workers. These employers have taken the biggest hit during the pandemic, with many shutting down for good. Those that are holding on can’t afford high premiums, so insurers are trying to transition their workers to individual plans.

They’re also looking with renewed interest at a Trump administration policy that lets companies buy Obamacare coverage for workers with tax-free dollars through health reimbursement arrangements. Though businesses didn’t rush to embrace the idea at first, they’re now openly discussing it — while insurers see it as a way to get a big influx of customers.

Obamacare markets still aren’t a high-margin business like the lucrative employer insurance system, and the law requires health plans to spend 80 percent of the premiums they collect on patient care. Insurers also caution they still don’t know how much of the bill they’ll foot for a future vaccine for Covid-19, and whether the money they’re saving from canceled elective surgeries and other care postponed by the pandemic will soon evaporate.

Even so, experts say the rate increases they’re seeking for next year are modest.

While most plans and states are still negotiating rates for 2021, Vermont last week announced new proposals from its Obamacare marketplace. A Blue Cross Blue Shield plan didn’t ask for an increase due to Covid-19. The other carrier, MVP Health Care, pitched just a small price bump.

“The early indications are rates are going to be favorable, similar to what we’ve had the last couple years,” said Dave Dillon, a fellow with the Society of Actuaries who consults with states on Obamacare. “It does not appear Covid 19 will be a significant variable.”


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