The news weighed on managed care operators across the board, but analysts argued the health exchange problem was specific to UnitedHealth, and not long after both Anthem (ANTM) and Aetna (AET) reaffirmed their earnings outlooks, statements that sent health care stocks higher.
Citigroup’s Ralph Giacobbe and Allison Schulz agree that calls for the “demise” of individual exchanges under the ACA are premature. They write that 2016 could be a tough year, but ultimately exchange uptake will take hold over time, thanks to the growing individual mandate penalty.
They admit that the recent dropoff in enrollment is puzzling, and that it will mean near-term pain for MCOs. However, they write that the real question is not the recent drop in enrollment but the question of whether the millions of still uninsured, many of whom are young and healthy, will come on board and balance out the risk for insurers:
Importantly, the penalty for not having hc insurance escalates from the higher of $95 or 1% of income above tax filing threshold in 2014, to the higher of $325 or 2% of income above tax threshold in 2015, to the higher of $695 or 2.5% of income above tax threshold in 2016. As the penalty escalates we would expect rational economic decisions, particularly for heavily subsidized individuals that could obtain healthcare insurance coverage for below the cost of the penalty.
Ultimately, they estimate some 7 million people could access coverage for less than the penalty:
We analyzed exchange plans across virtually every state looking at second-lowest cost Silver (base for which subsides are determined), lowest Silver, and lowest Bronze options. We then determine premium cost after subsidy at various income levels across tiers and cross reference incomes that can purchase bronze plan below the 2016 penalty on a state-by-state basis. Based on our analysis, we estimate that roughly 7M uninsured individuals would have access to hc coverage below the penalty in 2016.
UnitedHealth is roughly flat at recent check, while Anthem is off 0.7% and Aetna is down 0.2%.
Date: November 24, 2015