No. Obamacare isn’t killing the insurance industry.
The offcoterie 7 years of the Obama direction stimulate got been “yuge” for the wellness insurance industry, to role i of The Donald’s favorite words.
To live to a greater extent than precise, it has been yuge — almost unbelievably yuge, inwards fact — for the well-heeled folks who ain stock inwards the for-profit companies that dominate the industry, including Cigna together with Humana, the 2 insurers I used to operate for.
Medicare Advantage carriers acquire a raise
And terminal week, those well-heeled folks got substantially richer, thank you lot to Obama.
Here’s what happened:
On Friday, Feb 19, soon after the stock marketplace unopen for the week, the regime announced that it was giving a large enhance to the private insurance companies that pfrigidipate inwards the Medicare Advantage program, the private option to traditional Medicare.
Based largely on that news, investors rushed to purchase equally much of the wellness insurance companies’ shares equally they could acquire their hands on. By the fourth dimension the marketplace unopen on Friday, Feb 26, only 7 days later, Cigna’s stock was upwards 5.5 percent. Humana’s was upwards a whopping 8.1 percent. By comparison, the Dow Jones industrial fair was upwards only 1.5 percent.
How to acquire rich past traveling dorsum to 2009
Before I draw what the regime did that caused the cyberspace worth of the industry’s executives together with shareholders to spike, let’s stimulate got a quick trip dorsum to March 5, 2009, only a petty to a greater extent than than 6 weeks after Obama was sworn equally our 44th president.
That was the twenty-four hour period Obama hosted the White House Forum on Health Reform, a day-long coming together of near 100 of import folks – primarily direction officials, members of Congress, corporate executives, spousal relationship leaders together with lobbyists – that kicked off what would acquire a year-long ordeal to enact what would acquire the Affordable Care Act, ameliorate known, of course, equally Obamacare.
By the finish of that day, the part cost of almost all the for-profit insurers had slid into the cellar. That was partly because manufacture shareholders were worried that insurers would live inwards the Democrats’ crosshairs during the reform argue together with partly because disappointing tidings from General Motors together with several large banks had lay investors inwards a full general funk. Investors were peculiarly pessimistic that twenty-four hour period near how speedily the marketplace together with economic system would recover from the 2008 jar.
You could stimulate got bought a part of Humana stock that twenty-four hour period for $17.85 together with a part of Cigna stock for $12.77. Bargain hunters could stimulate got bought a part of WellCare, a smaller fellowship that specializes inwards Medicare together with Medicaid programs, for only $6.51.
If you lot together with I had been smart, nosotros would stimulate got taken a minute mortgage on our homes together with bought equally much of those companies’ equally nosotros could acquire our hands on. We mightiness non live equally rich equally The Donald, but nosotros would live a heck of a lot richer than nosotros were 7 years ago. That’s because really few companies inwards whatsoever manufacture stimulate got rewarded shareholders equally much equally wellness insurers stimulate got during the Obama years.
Get create to acquire upcoterie
So only how much richer would you lot be? Well, you lot would live a millionaire today if you lot would had invested only $99,882.49 inwards Humana stock on the twenty-four hour period of Obama’s forum. Or only $90,407.08 inwards Cigna stock. Or – read this together with vociferation – only $70,930.49 inwards WellCare stock.
While the Dow Jones fair has increased an impressive 253 per centum since March 5, 2009, Humana’s part cost is upwards a genuinely remarkable 1010 percent. No, that’s non a typo. Cigna’s part cost has done fifty-fifty better. It’s upwards 1113 percent. That’s to a greater extent than than 4 times ameliorate than the Dow. The other large companies aren’t far behind. Anthem is upwards 469 percent. Aetna is upwards 628 percent. And UnitedHealth Group is upwards 814 percent.
But it’s WellCare that takes the prize. Its stock cost is upwards an astounding 1,410 percent. Thanks only to its federal together with province regime customers.
This is a company, past the way, that has been inwards big-time problem alongside the regime to a greater extent than than in i case inwards recent years. On a rainy twenty-four hour period inwards Oct 2007, only a petty to a greater extent than than a twelvemonth earlier Obama was elected president, to a greater extent than than 200 federal together with province agents swooped downwardly on WellCare’s headquarter inwards Tampa, Florida. Four years later, federal prosecutors charged 5 erstwhile WellCare executives alongside intrigue to consign Medicaid fraud. They were defendant of diverting millions of dollars designated for Medicaid patients to fellowship profits. A federal jury afterward constitute 4 of the executives, including Todd Farha, the company’s erstwhile CEO, reprehensible of, amongst other things, wellness aid fraud together with making imitation statements to police enforcement officials.
The fellowship was inwards the headlines over again only 3 months after that 2009 White House forum. In June 2009, WellCare was forced to suspend marketing its Medicare plans after the regime discovered that the fellowship had been engaging inwards activities to addle together with mislead Medicare beneficiaries.
Before long, though, the fellowship was dorsum inwards the Obama administration’s – together with Wall Street’s – adept graces. Wall Street fiscal analysts are peculiarly bullish on WellCare, thank you lot to Obama. After the government’s recent annunciation of the Medicare Advantage pay hike for adjacent year, JPMorgan analyst Gary Taylor upgraded WellCare to “overweight” from neutral – significant that he thinks the company’s stock is a ameliorate treasure than the stock of many other companies – together with he raised his cost target from $80 a part to $114 a share. That agency he believes the odds are adept that WellCare’s stock volition increment some other 25 per centum during the coming year.
(That has to live peculiarly adept tidings to the investment house T. Rowe Price, which equally of Dec 31, 2015 was WellCare’s biggest shareholder, owning 4,700,778 shares of the company’s stock, or 10.65 percent. If T. Rowe Price had owned that much on March 5, 2009, its holdings would live stimulate got been worth near $31 million. Today it would live $431 million.)
Oh woe is us
Despite record-breaking profits twelvemonth after year, wellness insurance fellowship executives would similar us to believe that Obama has been terrible for wellness insurers. UnitedHealth’s CEO Stephen Hemsley, who made to a greater extent than than $66 1000000 inwards 2014, said inwards Nov that the fellowship mightiness halt selling policies on the Obamacare exchanges inwards 2017 because fiscal results from that segment of its operations stimulate got then far been lower than executives had hoped. He said a few weeks agone that the fellowship lost $720 1000000 inwards 2015 on its private wellness insurance business.
If you’re feeling sorry for Hemsley, know this: UnitedHealth Group reported a turn a profit of $11 billion (on revenues of to a greater extent than than $157 billion) inwards 2015, upwards from $10.3 billion (on revenues of $131 billion) inwards 2014. When you lot regard those impressive results, it’s patent the company’s Obamacare job concern is a tiny component part of its overall operations, but rather than trying to plough its Obamacare job concern around for the practise goodness of the land together with its Obamacare enrollees, it is considering bailing out of the exchanges for the practise goodness of its shareholders.
Private insurer’s best customer: Uncle Sam
Meanwhile, UnitedHealth has been making coin mitt over fist from federal together with province governments, thank you lot to Obama, only equally WellCare has. In fact, far to a greater extent than than one-half of the $157 billion it took inwards terminal twelvemonth came from Medicare, Medicaid together with other regime programs (i.e., from you lot together with me, the taxpayers).
While most Americans likely mean that the large for-profit insurers acquire most of their revenue from the private sector – from individuals together with employers that render coverage to their workers – that is no longer true. In fact, if Anthem’s acquisition of Cigna together with Aetna’s acquisition of Humana are approved afterward this year, the remaining large 3 for-profit insurers – Aetna, Anthem together with UnitedHealth – volition collect most of their revenues from the government, non from their commercial (private) customers.
Why? As the land has been aging, enrollment inwards Medicare has been growing at a fast clip, but enrollment inwards commercial wellness plans has been largely nonexistent for years. Just expect at how Anthem’s job concern changed inwards only i recent year. At the finish of 2014, the bulk of Anthem’s revenues nonetheless came from its commercial wellness insurance customers. During 2015, however, revenues from the commercial side of its operations really declined past 4.2 percent, to $37.6 billion, piece revenues from its regime operations skyrocketed past 21 percent, to $40.1 billion.
So equally you lot tin dismiss come across from these numbers, the biggest client for the biggest private insurers instantly is none other than …Uncle Sam. And the states, most of which stimulate got turned to private insurers to operate their Medicaid programs, contain their minute biggest customer.
More argue for shareholders to whoop it up
Investors for sure know this. That’s why the companies’ shareholders could hardly believe their adept fortune on Feb nineteen when the Obama administration’s Center for Medicare together with Medicaid Services (CMS) announced an unexpectedly large bump inwards pay for the insurers that pfrigidipate inwards the Medicare Advantage program.
During the wellness aid reform debate, wellness aid advocates made a large bargain of the fact that the regime had for years been overpaying private insurers every twelvemonth only to maintain them happy together with committed to the Medicare Advantage program. Democrats decided to stimulate got reward of wellness aid reform to finish those overpayments.
The manufacture howled, of course, together with predicted that insurers would stimulate got to cutting Medicare beneficiaries’ benefits together with that equally a issue the Medicare Advantage programme would start out to wither.
Well, it has done anything but wither. Insurers’ marketing to seniors has been to a greater extent than aggressive than ever, enrollment has grown at a faster clip than ever, together with the Medicare Advantage job concern overall has continued to live really profitable. Enrollment inwards Medicare Advantage plans instantly stands at xviii 1000000 – a tertiary of all Medicare beneficiaries – upwards from 10.5 1000000 inwards March 2009.
So instead of shrinking, enrollment inwards Medicare Advantage plans during Obama’s spotter has increased 71 percent.
Medicare Advantage plans received some $170 billion from the regime inwards 2015. Expect that issue to slap-up adjacent year. Although the increased payments volition vary for each pfrigidipating wellness plan, “many manufacture observers believe 2017 volition live ‘the best charge per unit surroundings we’ve seen inwards years,’” John Gorman, a consultant for Medicare Advantage insurers together with a erstwhile CMS official, told Modern Healthcare on Feb 19.
As Modern Healthcare reporter Bob Herman wrote:
“Insurers are salivating over the growing membership together with revenue ground of operations because fifty-fifty a pocket-size edge of 2% to 5% reaps billions of dollars inwards turn a profit for the industry, assuming plans stimulate got high character marks.”
(Insurers that grade higher on character metrics acquire to a greater extent than of taxpayer’s money.)
Wait. ANOTHER argue for insurers to celebrate???
Herman reported that insurers stimulate got some other adept argue to celebrate. As a final result of heavy lobbying past well-connected manufacture officials (the industry’s biggest merchandise group, America’s Health Insurance Plans, hired erstwhile CMS administrator Marilyn Tavenner, an Obama appointee, equally its president together with CEO terminal summer), Congress approved a one-year moratorium on an Obamacare-imposed taxation on wellness insurers.
The insurers’ adept fortune undoubtedly volition go on good into the future, something you lot mightiness desire to regard equally you lot expect at your investment portfolio. Thanks to the hundreds of millions of dollars the manufacture has doled out inwards effort contributions together with to pay lobbyists together with other impress peddlers over the years, the Medicare Advantage programme has many champions inwards Washington, together with on both sides of the political aisle.
One of the program’s biggest cheerleaders, inwards fact, is Chuck Schumer (D- N.Y.), who volition supervene upon Harry Reid equally the Democrats’ leader inwards the Senate adjacent year. If Democrats stimulate got dorsum the upper chamber, which is quite possible, Schumer volition live Senate Majority Leader. Regardless, he is only i of the industry’s many friends inwards really high places.
So chances are adept that, whichever political party comes out on meridian this coming November, wellness insurers volition go on to practise only fine. Even if Bernie Sanders is our adjacent president, the industry’s tentacles volition probable only acquire deeper into both the Medicare together with Medicaid programs, thank you lot to the large investments insurers go on to brand inwards House together with Senate campaigns.
