Humana bails Obamacare exchanges; signals beginning of the end of private insurer involvement

dimitrisvetsikas1969 / Pixabay



The News:

Humana Inc. (Louisville KY) said it will leave the commercial individual insurance business effective in 2018, including coverage offered on public exchanges under the Affordable Care Act, after being unable to successfully manage the costs of sick patients.

@Humana will leave commercial individual insurance business & #Obamacare exchanges in 2018 Click To Tweet

The big-5 insurer is the first major insurer to announce its plans for next year while the Republican-led Congress and the White House under Donald Trump struggle to come up with a repeal, repair or replacement for the ACA, Forbes points out.

Humana made its announcement Tuesday afternoon as part of a broader disclosure about its future strategy as an independent company following its decision to abort a merger with Aetna. The decision by Aetna and Humana to terminate their merger came after a federal judge blocked the deal.

Humana last year scaled back participation in Obamacare coverage to just 11 states for this year from 15 in 2016. But less than two months into 2017, Humana doesn’t see its prospects improving and is bailing on Obamacare altogether for 2018.

“All of these actions were taken with the expectation that the company’s individual commercial business would stabilize to the point where the company could continue to participate in the program,” Humana said in a statement. “However, based on its initial analysis of data associated with the company’s healthcare exchange membership following the 2017 open enrollment period, Humana is seeing further signs of an unbalanced risk pool. Therefore, the company has decided that it cannot continue to offer this coverage for 2018.”

Humana’s exit is in contrast to rivals, including Anthem and Centene which have said they see the 2017 Obamacare business as turning the corner this year. Both companies have said they see profits, but they and other health insurers are hoping Congress and the Trump administration make changes to shore up risk pools and limit special enrollment periods.

In January, Humana’s individual commercial membership was just 204,000, including 152,000 enrolled in “ACA-compliant plans.” Humana said the decline ”of approximately 450,800, or 69%, from December 31, 2016 reflects net membership declines during the ongoing open enrollment period for healthcare exchanges and the impact of product and service area reductions.”

Humana will focus on its Medicare Advantage business, which has been plagued by poor quality ratings.

“As an independent company, we will continue to innovate and sharpen our focus on the local healthcare experience of all our members, especially seniors living with chronic conditions,” Humana CEO Bruce Broussard said.

The focus on Medicare Advantage will be critical for Humana, which looks to recover from poor quality ratings from the Centers for Medicare & Medicaid Services.

Steve’s Take:

If at first we don’t succeed, and then continue to not succeed…time to get the hell out!

I can imagine Humana’s CEO Bruce D. Broussard saying words to that effect staring at himself in his bathroom mirror before heading off to work Tuesday morning.

Humana’s decision to exit the ObamaCare exchanges at the end of the year is a backbreaker for continued big-5 insurer participation in the Obamacare exchanges. And to no one’s surprise, President Trump immediately chimed in on Twitter.

“Obamacare continues to fail. Humana to pull out in 2018. Will repeal, replace & save healthcare for ALL,” Trump said in a tweet.

The complete pullout could trigger a “domino effect” among the other giants, Aetna, Anthem, Cigna and UnitedHealth, with companies abandoning the Obamacare marketplace and potentially leaving thousands with diminished or zilch coverage options in 2018.

“There’s a lot of uncertainty and the threat of repeal and delay is not helping things. It’s causing a lot of uncertainty, and Humana’s exit could be a harbinger of things to come,” said Topher Spiro, a health policy expert at the Center for American Progress.

Insurance companies have warned for months that they would begin dropping out of the marketplace if they didn’t see some signs of stability from Congress. And history shows that once one insurer drops out of the exchanges, others are likely to follow.

For example, when Aetna announced last year that it would pull out of most of the exchanges, UnitedHealth Group and Humana also scaled back their participation, The Hill points out.

“It did start to feel like a domino effect last year, and it could be something similar this year,” said Cynthia Cox, a health policy expert at the Kaiser Family Foundation. “There’s still a lot we don’t know and a lot of uncertainty in this market, and the Humana exit, in part, reflects that.”

Aetna has not yet said if it will participate in the exchanges in 2018, but at a Wall Street Journal event, its CEO echoed Cox’s prediction.

“I think you will see a lot more withdrawals this year,” Aetna CEO Mark Bertolini said. “There isn’t enough money in the ACA as structured, even with the fees and taxes, to support the population that needs to be served. It’s not going to get any better; it’s getting worse,” Bertolini added. Obamacare “is in a death spiral.”

Coming from the No. 3 health insurer (by market value), that’s a pretty gut-wrenching indictment of the status quo, let alone future prospects for the industry’s continued participation in the exchanges

Lawmakers have not yet come together on an ACA repeal and replace plan, and insurers are warning they only have about a month before they start crunching numbers and setting premiums for 2018. But they can’t start that process until they know if they will continue to receive funding established under Obamacare and whether the mandate that most Americans purchase health insurance will remain in place.

The Trump administration sent a signal to insurers, when it proposed a regulation aimed at “stabilizing” the marketplace that includes several changes insurers have long pushed for, such as shortening the enrollment period for 2018 and requiring proof that people signing up outside of the regular enrollment time qualify.

But coupled with other moves by the administration–such as weakening the individual mandate and pulling Obamacare advertisements a week before open enrollment ended–insurers are are getting mixed messages.

“On the one hand, you have a destabilizing message, and the other a stabilizing message, and it’s not clear what direction they’re heading,” Cox said.

The administration and Republican leaders have been silent about whether they would continue reinsurance and cost-sharing payments to insurers for taking on low-income enrollees and sicker patients. Some GOP lawmakers, such as Senate Health Committee Chairman Lamar Alexander (TN) and Rep. Mark Meadows (NC), have leaned in favor of the cost-sharing payments. Without those continued payments, many insurers view the marketplace as a nonstarter.

Despite this too little, too late peace offering by the administration, another health insurer is threatening to drop out of Obamacare after posting massive financial losses related to the program.

Molina Healthcare (Long Beach CA), one of the few big insurers that’s stuck with the ACA exchanges, said that it could pull out of some markets next year after losing $110 million in 2016, according to Bloomberg. CEO J. Mario Molina said he’s going to wait to see what the Trump administration does to shore up the program.

“There are simply too many unknowns with the marketplace program to commit to our participation beyond 2017,” Mr. Molina said during a conference call with investors after issuing fourth-quarter financial results.

Also weighing in was one of the biggest industry critics. As noted previously, Aetna CEO Mark Bertolini said the markets were “in a death spiral,” predicting that more health insurers will quit in 2018, following Humana’s announcement. Aetna shrank its involvement to four states for this year, from 15, after losing about $450 million on sales of ACA plans last year. The company is mulling whether to further reduce its presence.

“While we experienced strong enrollment growth across our business and have made progress on our cost cutting efforts, today’s results highlight the continuing challenges we face” in the ACA markets, Aetna said in a statement.

The insurer was forced to pay $325 million more than expected into a “risk transfer” program that’s meant to stabilize the law’s insurance markets. Lower-than-expected medical costs helped offset some of those payments.

Speaker Paul Ryan has said legislation to repeal Obamacare and replace major portions of that program will finally be unveiled after a 10-day US House of Representatives recess.

“After the House returns following the Presidents Day break, we intend to introduce legislation to repeal and replace Obamacare,” Ryan said at his weekly press conference, according to Reuters.

Presidents Day is on Monday, February 20, 2017 and the House returns on February 27, 2017.

Ryan spoke shortly after many House Republicans huddled in a closed session with newly-installed US Health and Human Services Secretary Tom Price to discuss the ACA and their options to change it. The session was part pump up and part laying out of “talking points” that can be delivered to constituents during the recess.

Lawmakers left the meeting saying there was plenty more work ahead on thorny issues, including squeezing savings from the Medicaid and possibly cutting some healthcare tax credits. The most glaring defect despite all the positive spin–and it’s evident to all–is that Trump, Secretary Price and their GOP brethren don’t know yet what exactly they will be joining forces on.

Given the recent history of lots of Republican pep talk about “repeal and replace” but nothing concrete resulting from it, I doubt whatever the promised “talking points” turn out to be will change the minds of Humana and other insurers.

Why would they remain involved in what’s turned out to be a big mess that’s getting messier each week, despite months of pep talks? What are the odds insurers will come out any further ahead after the GOP “replace-it” efforts, assuming there are some, someday?

Steve's Take: Mr. Broussard, my compliments on your decision to 'get the hell out' of #Obamacare Click To Tweet

Mr. Broussard, my compliments on your decision to “get the hell out.” I also see where your investors apparently share the same sentiment.