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Humana: Obamacare Exchange Enrollment ‘More Adverse Than Previously Expected’

By Avik Roy, Forbes Staff

Humana’s corporate headquarters in Louisville, Kentucky. (Photo credit: Wikipedia)

Humana’s corporate headquarters in Louisville, Kentucky. (Photo credit: Wikipedia)

1/10/2014 – On January 9, health insurance bellwether Humana formally announced something that industry observers have long suspected: that healthy and young people don’t think Obamacare’s insurance plans are a good deal for them. Those people, Humana indicated, are choosing to stay on their previous health plans, where allowed, instead of participating in the Obamacare exchanges. As a result, Humana “now expects the risk mix of members enrolling through the health insurance exchanges to be more adverse than previously expected.” The question now is: will taxpayers have to pick up the bill for the Obama administration’s last-minute changes to the law?

Losses on exchanges cushioned by outperformance elsewhere

Humana’s answer to this question, thus far, appears to be: not yet. The insurer “is evaluating the effects” of President Obama’s chaotic decision to allow some insurers in some states to continue old plans, and exempt some Americans from the individual mandate. But for now, Humana is “reaffirming its previous 2014 earnings guidance of $7.25 to $7.75 per diluted common share.” But that’s because Humana’s losses on the exchanges are being offset by good performance in the company’s other businesses.

Private insurers have diverged in their approach to the Obamacare exchanges. The largely non-profit Blue Cross Blue Shield plans have involved themselves with gusto, hoping that they can make up for any near-term losses by gaining a first-mover advantage and enrolling the initial crop of participants. The for-profit insurers have been more careful, participating only in states where they feel they can deliver a cost-efficient product.

Humana has been one of the for-profit players, along with Aetna, that has been most gung-ho about participating in the exchanges. “The exchanges probably are a good thing,” Humana CEO Bruce Broussard told me in an October interview. “It’s expanding coverage for people, and we think that in the long run it will be the right thing to do. In the short run, it’s got some bumps, and the industry and the government expected that. But we are focused on fixing those bumps, and to work with the government to make it both a good experience [while] driving down health care costs and improving the quality.”

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Source: http://www.forbes.com/sites/theapothecary/2014/01/10/humana-obamacare-exchange-enrollment-more-adverse-than-previously-expected/?utm_source=followingweekly&utm_medium=email&utm_campaign=20140113#!

1 reply »

  1. Here is the quote from Humana CEO Bruce Broussard from the article:

    “The exchanges probably are a good thing,” Humana CEO Bruce Broussard told me in an October interview. “It’s expanding coverage for people, and we think that in the long run it will be the right thing to do. In the short run, it’s got some bumps, and the industry and the government expected that. But we are focused on fixing those bumps, and to work with the government to make it both a good experience [while] driving down health care costs and improving the quality.”

    Boy, there is a lot of material in that quote and I can’t resist picking it up and running with it; kind of like low hanging fruit.

    Well, I would want it to work on “fixing those bumps” too if I was a health plan CEO. Consider what is at stake; it’s a pretty good deal if you are in the third-party payment industry. They pretty much have a captive market; as if the third-party domination of the healthcare landscape was not monopolistic enough before the ACA. Apparently, it is not economically wrong-headed enough that Americans must embed the risk of true economic losses due to medical expenses within the framework of an expensive prepaid policy like before, but now they are coerced into very limited choices by a misguided, poorly implemented law that forces them into policies with “benefits” they may not want or need. And, to add injury to insult, tax payer money is used to subsidize a product that most people wouldn’t want or couldn’t afford in a real market without those same subsides.

    If he was really concerned about “expanding coverage for people”, as he insists the law does, then why didn’t the law just address the 15% of Americans that lacked basic coverage and go about helping them secure it – instead of blowing up the whole thing for 100% of us? The reason, of course, is it was never about coverage in the way you and I think about coverage. It was about mucking things up so badly that the only option left when the dust settles is government sponsored single-payer health care.

    I think he tipped his hand a bit when he says they are going to “…work with the government to make it both a good experience [while] driving down health care costs and improving the quality.” It’s good work it you can get it! He does know which side his bread in buttered on, I give him that. Seriously, I can’t fault him for looking after the Humana’s best interest. That is one of his fiduciary responsibilities.

    Does Mr. Broussard REALLY believe, with all the data staring him in the face, that this experiment will drive down costs? It is mathematically impossible for the ACA, as designed, to drive down costs. Let’s list the hurdles to that goal of “driving down health care costs”.

    Here we go. You can’t take a product that should be priced based on actuarial data (insurance) and that should not be used for routine expenses, and then…

    (1) remove/outlaw individual underwriting, (2) guarantee coverage, (3) prohibit exclusion due to pre-existing conditions, (4) add even more prepaid items, (5) reduce cost-sharing for the lower priced common items (preventative services), (6) mandate benefits that the policy holder may not need or want, (7) cap premiums, (8) limit the premium spread between young and seniors to 3x for seniors even though they consume 5 – 6x more care, (9) tax some policies in the small company market, (10) charge insurers re-insurance fees in some cases, (11) subsidize these otherwise unaffordable policies with tax payer money, (12) add about 30 million more people to Medicaid (but no more doctors in the short term)…

    …and really believe it will result in lower costs… and keep a straight face. Unless, of course, Mr. Broussard is going to ask President Obama for a waiver to exempt us from the laws of economics!

    I think I forgot a few more of the hurdles to “driving down health care costs” that the ACA faces. But, I think 12 reasons is sufficient to raise some legitimate doubts, don’t you?

    Oh, and then there is the latest study looking at the Oregon Medicaid data that shows convincingly that enrolling people Medicaid that were previously uninsured results in a 40% increase in emergency room visits for that group compared to before they were covered. That blows a big gaping hole in the theory (that I used to hold too) that alleged that providing insurance to people would keep them out of the ER and allow them to be seen in the primary care clinics. Turns out, that doesn’t really happen in the real world. So, not only do you have the approximately $3,000 per head (the CBO’s estimate) for what it costs for Medicaid coverage, but you have vast over-utilization and mis-utilization of resources. We already suspected the under-insured or uninsured actually under-utilized care (duh?) ..

    I could have (and anyone that read this wishes I would have) summed it up in two sentences:

    Medical coverage does not equal care. And that gulf between the two issues is going to just get bigger under ObamaCare.

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