Insurers May Take a Back Seat

[Yagents]

If I were an insurer, I'd wait a year before entering the exchange market. All the headaches, for little profit. Let someone else fall on their face, and pick up all the unhappy clients in year 2. Article has insight from the top insurers approach

Big Health Insurers Aim for New Exchanges, But Cautiously - WSJ.com

 

[AllenChicago]

YAgents, because I'm not a subscriber to the Wall Street Journal, the link doesn't work for me. Is there a way to copy and paste the article into your post? Describing why insurers should be cautious of the exchange sounds like a good read.
Allen

 

[Yagents]

YAgents, because I'm not a subscriber to the Wall Street Journal, the link doesn't work for me. Is there a way to copy and paste the article into your post? Describing why insurers should be cautious of the exchange sounds like a good read.
Allen

Big Health Insurers Aim for New Exchanges, But Cautiously


SAN FRANCISCO--Some of the biggest health insurers confirmed goals this week to offer plans over state-based exchanges set to launch late this year, but they're moving cautiously while waiting to learn more about these new markets.
Exchanges are a hot topic at the annual J.P. Morgan health-care conference this week because they could offer significant new business by extending coverage, sometimes backed by subsidies through the health-care overhaul law, to millions of Americans. PricewaterhouseCoopers has estimated the markets could create $55 billion in premiums next year and $205 billion by 2021.
Many unresolved questions remain, however, about how each state market will work and how profitable the markets will be. As a result, insurers are treading carefully.
"I do want to emphasize that we're going to walk before we run in this marketplace," said Bruce Broussard, chief executive at Medicare-focused insurer Humana Inc. (HUM), during his presentation.
Top executives at WellPoint Inc. (WLP), Cigna Corp. (CI) and Aetna Inc. (AET) also addressed exchanges at the conference. WellPoint is considered to have the most at stake among managed-care heavyweights because its business is tilted the most toward individual health plans and insurance for small businesses, two markets set to see competition from exchange-based offerings under the health law.
WellPoint's recent purchase of Medicaid insurer Amerigroup dilutes the exposure somewhat, but the company is still a big player in these markets. Deutsche Bank said Cigna is least exposed among other big commercial insurers, followed by Aetna and UnitedHealth Group Inc. (UNH). Humana is heavily focused on Medicare plans.
WellPoint is planning for now to join exchanges in all of its states, interim Chief Executive John Cannon confirmed at the conference. The company can pull back if it sees market issues, but WellPoint is "determined to participate where it makes sense," Mr. Cannon said. "It's in our best interest to play on the exchanges."
Other insurers have taken pains to stress their lack of exposure to competition from the exchanges, positioning the markets as more opportunity than risk. "The good news is we don't have to defend something," said David Cordani, chief executive at Cigna. "We're not forced to take any actions."
But he confirmed in an interview that Cigna does aim to compete in certain, unspecified markets. He also noted that final regulations are still coming through, creating some uncertainty.
Another point of caution is the ease at which people getting coverage through exchanges can switch plans from year to year, or leave the market. People also could shift between selecting health plans over exchanges and qualifying for Medicaid, the health plan for the poor, as their financial situation changes.
"This is going to be a very fluid group in and out of health care," said Vaughn Kauffman, U.S. healthcare payer advisory leader at PricewaterhouseCoopers.
The fluid market should heighten insurers' interest in making sure the markets are reliably profitable, because they'll have little certainty in keeping money-losing customers long enough to make improvements. Discussions at the J.P. Morgan conference suggest expectations for modest profit margins somewhere in a 3%-5% range.
Aetna aims to participate in exchanges in 15 states next year. But like others, the company also noted its willingness to leave problem markets if necessary. "If exchanges are successful--if--it becomes a bigger opportunity for us," Chief Executive Mark Bertolini said.
He also highlighted the modest earnings contribution Aetna gets from individual and small-business insurance. "What we have is an option to play," Mr. Bertolini said.
UnitedHealth also has cited the long-term potential for its UnitedHealthcare insurance unit to gain new customers through exchanges, and it's investing to prepare. But the company, which didn't present at J.P. Morgan, hasn't specified its target markets.
"UnitedHealthcare continues to research and better understand how each of the states' exchanges may be structured," the company said in a statement. "Given the regulatory variation from state to state, we have not yet made any final decisions about where we will be offering our health plans through the exchanges."
Write to Jon Kamp at [email protected]

 

[AllenChicago]

YAgents, thank-you for pasting in the WSJ text.

So insurers are expecting to earn only a 3% to 5% profit on
exchange sales, yet some are eager to hop onboard. Defies
common sense doesn't it?

Sounds like zero-percent commission to me. Perhaps we would
have been better off if the deep pockets of HHS (ie the taxpayers)
were paying us.
-ac

 

[Yagents]

That's their profit margin now. Our commission comes out of the other 15% of the MLR as it does now. The carriers mostly met the MLR paying us 10%/5% over the past year, with bonuses. With higher premiums, the numbers all become larger in dollar terms.

 

[AllenChicago]

Awesome YAgents. Your clarifications and explanations are greatly appreciated!

It's reassuring to know that commission percentages will probably not need to be cut. However, 10% of a $1,600 monthly family premium is probably just dream material, eh?
-ac

 

[pahealthquotes]

Awesome YAgents. Your clarifications and explanations are greatly appreciated!

It's reassuring to know that commission percentages will probably not need to be cut. However, 10% of a $1,600 monthly family premium is probably just dream material, eh?
-ac

I would look for insurers to pay flat enrollment fees per contract written. The most confusing situation I now see is how will agents be able to apply the subsidies to the overall premium reduction.

 

[bluediamond]

Well pa my understanding when I go into a carrier to do a quote they will also have a link to I believe IRS that will show you the subsidy if there is one and when you enroll them it will all be done automatically. This is just what I've heard thru a couple of corporate people, I don't know this to be true. The most info I've seen is what Bill posts and searching the internet and Cigna. I do know that they look two years back for your subsidy, so someone that may qualify let's say today because of poverty level, may not qualify next year. If my carrier is getting things together they're keeping to their selfs or maybe sharing bit's and pieces with MGA's and it's not filtering down yet. It most definitely will be a cluster F when this all starts without sufficient training.

 

[Yagents]

The only entity that can verify and distribute subsidies is the actual state exchange. So, whether you use an agent website or a carrier website, it will redirect you to the exchange where the transaction will take place. Yes, 2014 subsidies will be based on 2012 income. Just wait for the "clawback" of subsidies as your income rise, that will be the "shocker" in future years.