Category: Health Insurance

Yet Another and then Another Health Insurance CO-OP Bites the Dust

Last Summer I wrote, “Consumer Operated and Oriented Plans… are slipping into insolvency.” Last week I wrote, “Obamacare health insurance cooperatives are falling by the wayside like drunken ice skaters on a frozen pond.” The pace of failure is accelerating!

The latest two failures are the CO-OPs in Utah and South Carolina. In the past week, Consumers’ Choice Health Insurance Company in South Carolina and Utah’s Arches Health Plan are the latest CO-OPs to announce they will close. CO-OPs in New York, Nevada, Tennessee, Louisiana, Colorado, Iowa, Oregon and Kentucky have either closed or announced they were not continuing into 2016.

Another Day, Another Obamacare COOP Closes

Did the sun come up this morning? That must mean another Obamacare COOP has closed. This time, it is in South Carolina:


High-Deductible Health Insurance Crushes Health Spending

A new working paper published by the National Bureau of Economic Research (NBER) shows how much high-deductible health plans reduce spending:

We study consumer responsiveness to medical care prices, leveraging a natural experiment that occurred at a large self-insured firm which forced all of its employees to switch from an insurance plan that provided free health care to a non-linear, high deductible plan. The switch caused a spending reduction between 11.79%-13.80% of total firm-wide health spending ($100 million lower spending per year). We decompose this spending reduction into the components of (i) consumer price shopping (ii) quantity reductions (iii) quantity substitutions, finding that spending reductions are entirely due to outright reductions in quantity. We find no evidence of consumers learning to price shop after two years in high-deductible coverage. Consumers reduce quantities across the spectrum of health care services, including potentially valuable care (e.g. preventive services) and potentially wasteful care (e.g. imaging services).

(Z.C. Brot-Golberg, et al., What Does a Deductible Do? The Impact of Cost-Sharing on Health Care Prices, Quantities, and Spending Dynamics,” NBER WP No. 21632, October 2015.)

Colorado Health Insurance COOP Closed

CO COOPLast Friday, Colorado’s Division of Insurance ordered the state’s Obamacare COOP not to offer policies in the state’s Obamacare exchange next year. Obamacare’s COOPs are cascading into collapse quite quickly. NCPA has been studying them since last June, and our research has been prescient.

Obamacare COOPs were specifically stood up by the Affordable Care Act with government loans. They cannot hide their Obamacare losses like larger, incumbent insurers (for which Obamacare exchanges are small parts of their businesses) can.

To show how fast the fall of this COOP has happened, I’ll share three stories:

Obamacare COOPs’ Loans Are “Assets”

My colleague Devon Herrick was prescient about the collapse of Obamacare’s COOPs (nonprofit cooperative insurers set up with government loans to compete unfairly in Obamacare’s exchanges), writing an Issue Brief on the topic last June.

Since, then Obamacare’s COOPs have continued to collapse, stranding almost half a million Obamacare beneficiaries. Chris Jacobs of the Conservative Review has written about the administration’s latest attempt to rescue the remaining COOPs, by rebranding their liabilities as “assets”:

Selling Health Insurance Across State Lines

Here we go again: Republican politicians are rolling out the easily digested soundbite of “selling health insurance across state lines” as a solution to high premiums.

In the New York Times, Margot Sanger-Katz examines the idea:

At the Fox News Republican debate last month, Donald Trump offered a way to lower health care costs: allow insurers to sell their policies across state lines.

The idea of developing a more national market for health insurance has become a major part of Republican health reform orthodoxy. A bill to allow interstate insurance sales was introduced in Congress in 2005, and, since then, has been a part of the platform of every Republican presidential nominee. Mr. Trump is not alone in his view: Scott Walker, Marco Rubio, Ted Cruz, Rand Paul, Rick Santorum and Bobby Jindal have all endorsed it.

The only problem? It makes no sense. “I’ve tried for 10 years to explain this to Republicans; it is a big problem,” said Merrill Matthews, a resident scholar at the Institute for Policy Innovation.

Another COOP Bites the Dust!

It was just announce that yet another health insurance COOP has failed. The Louisiana Health Cooperative will be closing its doors at the end of the year.  I have followed the Obamacare health insurance cooperatives, officially known as Consumer Operated and Oriented Health Plans  (COOPs), since their inception. They were intended to function as a so-called “public plan option” in Obamacare. And they are not doing well!

Investors Not Buying Anthem-Cigna Deal

Earlier this week, I wrote that merger arbitrage spreads indicated investors are not convinced the spate of recently announced takeovers among health insurers will close. Today’s news that Anthem (NYSE:ANTM) and Cigna (NYSE:CI) have agreed to takeover terms does not change that story.

Anthem’s original (hostile) bid was for $184 per share. Today’s is a minor bump, of $188 per share. The big difference is the mix of cash versus Anthem stock. The original bid was $126.22 in cash, versus only $103.40 today. Today’s bid includes 0.515 shares of Anthem stock, significantly higher than the previous bid.

The joint announcement claimed the new bid was at a premium of 38.4 percent of Cigna’s unaffected price. However, prices of both shares used for valuation in the announcement were May 28 closing prices.

United Health Group’s Q2 Earnings: Steady Growth, Obamacare Results Unclear

UNHUnitedHealth Group (NYSE: UNH) reported its second quarter results yesterday. They show an enterprise that is firing steadily on all cylinders. UNH has two main businesses: UnitedHealthcare, the health insurer; and Optum, a portfolio of businesses that provide services crunching Big Data to customers that include other insurers.

From the press release:

  • Second quarter revenues grew 11% year-over-year to exceed $36 billion,
  • UnitedHealthcare grew to serve 1.6 million more people domestically in the past year, including 175,000 people in the second quarter
  • Optum revenues of $13.6 billion grew 16% year-over-year; operating earnings Increased 19%
  • Second quarter net earnings grew 15% year-over-year to $1.64 per share, with cash flows from operations of $1.2 billion.

Government-Health Complex Continues to Congeal

TevennerThe government-health insurance complex continues to congeal as AHIP, the health insurers’ main trade association, picked former Centers for Medicare & Medicaid Services (CMS) Administrator Marilyn Tavenner to lead it.

Although not confirmed as CMS Administrator until May 2013, she acted in that capacity since December 2011, after the administration fumbled the appointment of Dr. Donald Berwick to the position. In other words, she is the grande dame of Obamacare.