Yes, UnitedHealthcare, some carriers ARE making a profit via the ACA exchanges.
As a single payer advocate, it may sound strange to hear me rooting for private, for-profit insurance carriers to do well, but the fact remains that for the time being, the ACA exchanges are a huge part of the individual heatlhcare market, and they're based on the capitalistic theory of a competitive market helping keep prices from spiraling out of control. For the next few years, at least, it therefore behooves me to be hopeful for their success.
One of the biggest claims being made by ACA critics of late, especially after the Risk Corridor Massacre which helped wipe out a dozen Co-Ops and at least one (potentially 2) private carriers, is that "no one's making any money" on the exchanges, thus dooming them (and thus, Obamacare) to failure. In addition to the Co-Op meltdowns, the Big Story last fall was insurance giant UnitedHealthcare's dramatic 180º turn from "Everything is Awesome!" in their Q3 report to "We're Doomed!" less than a month later. UHC's woes continued into the fourth quarter with a whopping $720M loss blamed on the exchanges...even though they still made a profit of over $1.2 billion in the quarter via their other divisions:
UnitedHealth covers 700,000 Americans who bought coverage on public exchanges and that number will not grow in 2016 , executives said. It’s a fraction of the company’s overall medical membership of more than 46 million people and executives said they will make a decision in the middle of this year on whether to continue offering public exchange products next year.
However, this article about another major health insurance carrier, Anthem BCBS, caught my eye. The headline looks pretty bad: Their fourth quarter profit dropped 64%, and you'd probably think that it's the individual ACA exchanges which were to blame.
The insurer covered 791,000 people through the ACA's public exchanges at the end of last year. Unlike other insurers, Anthem said that business has been profitable, but enrollment came in about 30 percent lower than it expected.
Larger rival UnitedHealth Group Inc. and other insurers have said their exchange business has struggled in particular with customers who have been allowed to sign up outside open enrollment periods. Those customers tend to generate more claims than those who sign up during open enrollment.
Swedish told analyst Wednesday that his company is paying close attention to how the government handles these special enrollment periods as it judges how sustainable the exchange business will be in the future.
"Unlike other insurers, Anthem said [the ACA exchange] business has been profitable".
Anthem was holding around 9% of all ACA exchange enrollees at the end of the year, very similar to UHC's 8%. Both companies are massive, multi-state behemoths with a similar presence on the exchanges.
Yet for all of UHC's constant griping, rival Anthem somehow managed to make a profit.
Who else? Well, according to this rather negatively-angled article in the Albany TimesUnion:
Though New York's Obamacare exchange has increased the number of state residents with insurance, losses sustained by participating insurance companies over the last two years raise concerns about the online market's sustainability, according to a report released Tuesday by the financial services company Standard & Poor's.
The state's exchange, called NY State of Health, was created in October 2013 to meet the requirements of the federal Affordable Care Act, known as Obamacare.
"If the experience in New York is any indication of how the rest of the country is managing through the initial years of the ACA, we can expect it to be a bumpy ride," the report concludes.
Three-quarters of the insurers participating in New York's exchange reported operating losses for their health plans sold to individuals in 2014, the report states. The state's insurance regulator, the Department of Financial Services, denied full rate increase requests from all but five insurers operating on the exchange.
OK, yes, 3/4 of the carriers lost money on the exchanges (although this also appears to include off-exchange enrollees). But guess what? There's 16 different carriers on the NY exchange (there were 17 until the NY Health Republic Co-Op went kaput), which means that 4 of them made money, although it doesn't specify which of the four did so, or whether they just barely broke even or what.
This assessment is supported by an article by Sara Hansard of Bloomberg BNA:
Blue Cross-affiliated insurers, managed care plans that previously served the Medicaid population and provider-sponsored plans are increasingly dominating the competition in the exchanges, the report said.
The more serious concerns for the exchange markets are “affordability, network adequacy, outreach and enrollment funding, sufficiency of risk adjustment, and possible adverse selection against the nongroup market as a whole during special enrollment periods,” the report said.
However, Kathy Hempstead, who directs coverage issues at the RWJF, said that insurers are making their plans more economically viable by moving to narrower, lower-cost provider networks. And the Department of Health and Human Services also has limited insurer losses by reducing the number of special enrollment periods in which people can sign up outside of the normal enrollment periods. Health plans have complained that people enrolling during the special enrollment periods have proved to have higher medical claims than people enrolling during the normal enrollment period.
“My expectation is that there will not be the same kind of losses in 2016” as there were in 2015, Hempstead said. “Will it be a garden party? I’m not saying that, but I think it’s going to be better.”
(Disclosure: the Robert Wood Johnson Foundation (RWJF) has a couple of banner ads on this site)
Of course, you can argue that the "narrow network" trend is part of the problem in the first place, but the point is that yes, it is indeed possible to make a profit off the the exchanges if you have good management skills and a little luck.
You know, just like you'll find in any free enterprise market.