Category: Health Insurance

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.

Health Insurers Consolidate on Business; Fragment on Policy

A few days ago, this blog discussed the wave of consolidation among health insurers. The two main deals discussed in the business press are Anthem’s bid for CIGNA and the likely takeover of Humana by a bigger insurer which wants to beef up its Medicare Advantage and/or Medicaid managed care business.

While this consolidation plays out, the policy world was surprised to see the largest insurer, UnitedHealth Group (UNH), pull out of AHIP, the health plans’ trade association. Both parties soft-pedalled the exit of the association’s largest member.

I do not plan to speculate recklessly on the reasons for the exit. UNH noted that its “diversified portfolio” is not best served by membership in AHIP. UNH has two very distinct businesses, UnitedHealth Group and Optum. The former is a health insurer and the latter a vendor of big-data analytics. UNH consistently stresses that they are different businesses, to the degree that it sometimes verges on denying it is a health insurer at all.

Employer-Based Benefits Steady In Obamacare’s Second Year

Urban Institute researchers have published new research supporting the thesis that Obamacare has not harmed either offers or uptake of employer-based health benefits:

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  • Employer-sponsored insurance coverage, offer, and take-up rates remained unchanged among nonelderly workers from June 2013 through March 2015.
  • Coverage, offer, and take-up rates were stable for workers in both small and large firms as well as for workers with higher and lower incomes.
  • Employer-sponsored insurance coverage also remained unchanged among all nonelderly adults from June 2013 through March 2015.

This corroborates the case I recently made, although there is contrary evidence.

Health Insurance Consolidation Begins With A Bang

Just last Thursday, I wrote about the forthcoming consolidation in U.S. health insurance. My thesis was that only large, centralized, politically powerful insurers could continue to thrive.

With perfect timing, Humana, Inc., announced on Friday that it was putting itself on the block, and the shares rallied about twenty percent. They continue to climb today.

“Because of the Affordable Care Act, the whole insurance market is shifting towards a lower margin model,” said Chris Rigg, an analyst with Susquehanna Financial Group. “Generally speaking, the bigger you are, the better.” (Michael J. de la Merced & Julie Creswell, New York Times DealBook, May 29, 2015)

Price’s Health Reform Hit From The Right

I recently discussed Rep. Tom Price, MD’s Empowering Patients First Act in quite positive terms. Not everyone is on board. My good friend Dean Clancy labels the bill Health Care Cronyism:

Section 401, for example, authorizes new federal “best practice” guidelines written by medical societies, designed to give physicians extra protections from malpractice lawsuits. These guidelines aren’t merely educational, though. They’re established as powerful litigation tools in state courts. If a physician can show he followed them, his accuser must meet a higher burden of proof to establish negligence. That may be a good idea, but it’s unconstitutional. The power to regulate civil justice is reserved to the states under our federal system. There’s neither a legal nor a practical justification for federal medical malpractice reform. States have this. They can reform their tort systems, and many have done so, with success.

Mr. Clancy and I are in complete agreement that Congress has no role meddling in medical malpractice. So, why did I ignore this part of Dr. Price’s bill and leave Mr. Clancy prime real estate in U.S. News & World Report to lay into it?

Most Employers Will Use Private Benefits Exchanges by 2018

A new survey from Array Health reports four of five insurance executives anticipate that most employers will use private exchanges to offer benefits by 2018. According to the survey, private exchanges are a win-win situation because they reduce administrative costs.

We like private exchanges because they pave the way for individual health insurance to be the standard. The Array report seems to support this conclusion:

More exciting, perhaps, is the future outlook around business savings as single-insurer private exchanges start to move with consumers – from group settings to individual plans – keeping loyal consumers tied to particular insurance brands through the exchange model.

Maybe The Government Should Just Not Ask People If They Are Uninsured?

Sir John Cowperthwaite was the Financial Secretary of the British Colony of Hong Kong when it began to boom in the 1960s:

Asked what is the key thing poor countries should do, Cowperthwaite once remarked: “They should abolish the Office of National Statistics.” In Hong Kong, he refused to collect all but the most superficial statistics, believing that statistics were dangerous: they would led the state to to fiddle about remedying perceived ills, simultaneously hindering the ability of the market economy to work. This caused consternation in Whitehall: a delegation of civil servants were sent to Hong Kong to find out why employment statistics were not being collected; Cowperthwaite literally sent them home on the next plane back. (Alex Singleton, The Guardian)

What does this have to do with health insurance? The Wall Street Journal’s Jo Craven McGinty reports on the Census Bureau’s rejigging of its measurement of how many Americans are without health insurance: