Obamacare has many health care insurers worried

Back to TopCommentsE-mailPrintBookmark and Share

After soaring for months, stock prices for insurers such as UnitedHealth Group and Aetna have lost altitude in recent weeks. Although the rollout of the glitch-plagued federal health-insurance website is partly to blame, it’s what lies ahead that has investors concerned.

“There’s a whole host of operational questions about 2014,” says Thomas Carroll, a health-care analyst at Stifel Nicolaus.

The exchanges are supposed to add about 7 million new taxpayer-subsidized customers to private insurers’ rolls in 2014, according to the Congressional Budget Office. Yet getting a true read on how enrollment is progressing is difficult given the technological breakdowns that have beset healthcare.gov and some of the state-run sites.

Another concern for companies: The 2010 health law mandates cuts to Medicare Advantage plans, which are offered by private insurers that contract with the government to provide care to the elderly. It’s also unclear how much of a new tax on premiums carriers will be able to pass on to customers. In an Oct. 31 note to clients, analysts at Goldman Sachs projected that insurers will suffer underwriting losses in 2014 on customers who purchase their policies through the exchanges.

The murky future was a recurring theme in the most recent round of quarterly earnings calls.

UnitedHealth, the largest medical insurer in the U.S., declined to raise its full-year forecast on Oct. 17, despite third-quarter profits that matched analysts’ estimates. The Minnetonka, Minn.-based company left open the possibility that earnings could drop next year. CEO Stephen Hemsley told analysts he sees “limited potential” for lowering medical costs further and expects Medicare reimbursements to be a drag on results next year, because they’re not keeping up with rising expenses. The company’s 2014 forecast will straddle the range it’s given for 2013, he said.

WellPoint Inc. CEO Joseph Swedish acknowledged in an Oct. 23 call with analysts that the rollout of the marketplaces has been “lumpy,” making it impossible to give an early read on enrollment. Chief Financial Officer Wayne DeVeydt suggested expectations for 2014 profit for the Indianapolis-based insurer may be below this year’s results.

Aetna won’t be affected much by the problems with the exchanges, CEO Mark Bertolini told analysts during an Oct. 29 call. The Hartford, Conn.-based company gets less than 3 percent of its revenue from the individual and small-group sales the marketplaces target. Still, problems with the federal website, which may not be fully functional until December, could deter so-called young invincibles from buying plans, Bertolini says.

“The younger, healthier people aren’t likely going to give it more than one shot,” he says. That could lead to the industry’s worst-case scenario: a disproportionate number of sick consumers signing up, driving up expenses for carriers and customers.

It’s not hard to understand why high-flying insurance stocks stalled in October. Through September, a Standard & Poor’s index of the top 10 carriers had gained 35 percent for the year, about twice the return for the S&P 500. The shares rose as U.S. medical costs continued their slowdown since the 2009 recession and amid signs that implementation of Obamacare was moving smoothly.

Since Oct. 1 the insurer index is down 2 percent, even as the broader market has risen. Jennifer Lynch, an analyst at BMO Capital Markets, suggests that investors may remain cautious until the outlook is clearer: “Everyone is focused on the moving parts for 2014.”


  • Mid Terms
    What a mess Obama has made. I hope people remember this fiasco and his dishonesty when the mid-term elections arrive. Voting is the only way we can try and roll socialism back.
  • Symptoms of a Bigger Problem
    The article states: "Although the rollout of the glitch-plagued federal health-insurance website is partly to blame, it’s what lies ahead that has investors concerned." BIG PROBLEM! This uncertainty extends far beyond healthcare. Small and big businesses are standing quietly on the sidelines with their hands in their pockets, not creating jobs, because there is so much uncertainty due to ever-increasing government regulations (like ObamaCare). The risk of investing/expanding/hiring is too great ... when the rule-makers are literally "making up the rules as they go". This nation prospered more than all others when capitalism was adopted and allowed to deliver prosperity. As socialism steps on the throat of capitalism, prosperity can only be seen in the rear view mirror. Get used to "less". Less healthcare, less career opportunity, less everything. Thank the socialists.
  • "Entitled"?? Really???
    Why is everyone entitled to health insurance, Fred??? We are still a democratic country (last I checked)and I don't want to live in the USSI (Union of Soviet Socialist Idiots). You cant' get car insurance AFTER you've had a wreck. You can't get homeowner's insurance after it burns down. Why should I have to pay for everyone's insurance if they never bothered with insurance until they were sick? I have paid premiums all my life and my coverage keeps getting more expensive with fewer benefits. Do I ask you to pay for mine? NO. Geez - that's what wrong with this country - Entitlists!
  • Wild ride
    My hope is that insurance rates will skyrocket through the roof and then everyone will finally demand universal health insurance. i.e. Medicare for all. Every citizen in this country should be entitled to the same health insurance coverage.
    • Always remember
      Whenever the insurance companies say anything, it is always self-serving, as their are still simply profit seeking entities. They want to secure their honey pot.

    Post a comment to this story

    We reserve the right to remove any post that we feel is obscene, profane, vulgar, racist, sexually explicit, abusive, or hateful.
    You are legally responsible for what you post and your anonymity is not guaranteed.
    Posts that insult, defame, threaten, harass or abuse other readers or people mentioned in IBJ editorial content are also subject to removal. Please respect the privacy of individuals and refrain from posting personal information.
    No solicitations, spamming or advertisements are allowed. Readers may post links to other informational websites that are relevant to the topic at hand, but please do not link to objectionable material.
    We may remove messages that are unrelated to the topic, encourage illegal activity, use all capital letters or are unreadable.

    Messages that are flagged by readers as objectionable will be reviewed and may or may not be removed. Please do not flag a post simply because you disagree with it.

    Sponsored by

    facebook - twitter on Facebook & Twitter

    Follow on TwitterFollow IBJ on Facebook:
    Follow on TwitterFollow IBJ's Tweets on these topics:
    Subscribe to IBJ
    1. Good Day I am Mr (Victoria Wright) from United state of America, i stayed in NEW YORK, and i have a broke up business, until i found this company email who help me to gain a loan for business,, and now i want to used this short medium to congratulate the below company for the fast and safe money they loan to me without any form of collateral, i loan 500,000USD from the company to save my business and lots more, i saw their mail on the internet, everyone always give testimony for what they did, so i quickly contacted them and they all did everything for me without stress and my money was sent to my account just 3 days later, i was surprise and i feel so glad, now i have a standard business control agent who help me, now i will advice those who need urgent loan to contact him at the bellow email:zenithfirm12@gmail.com

    2. NOTICE:This is to inform the general public that Vampires are real. My name is James Franklyn.,am an agent of vampire,am here to introduce our new world trend to you,a world of vampire where life get easier,we have made so many persons vampires and have turned them rich,you will be assured long life and prosperity,you shall be made to be very sensitive to mental alertness,stronger and also very fast,you will not be restricted to walking at night only even at the very middle of broad day light you will be made to walk.In case you are wildly oppressed by some unscrupulous persons we can still help you fight them.Your protection is assured immediately you join.Just contact the bellow email if you are interested we are here to attend to you anytime you want us. Contact the bellow email for more details. Email:vampirescreed@hotmail.com Sincerely: James Franklyn.

    3. Bravo! Someone else that is willing to speak the truth! Bravo!_____NBCSN is available in almost 2 MILLION more homes than just a few years ago, but Indycar STILL gets less total viewers than it did just a few years ago when NBC took over Versus. Attendance and ratings cratered with the end of season races (just when the title battle got "interesting" HAH!__________And now...new race in Basilia, where Miles celebrated the "rich history" of Indycar racing there. Rich history? What, 7 events in the 100 years of AOW? Yep, some history. Well, at least its an oval. It's not??? Are you kidding me??? Gosh darn road racin furriners.

    4. PURITY RAY LOAN OFFER........ Have you been denied by your banks,or are you in need of of an urgent loan to pay of your bills we are capable of giving loans @ cheaper rate to interested individuals, student, companies and members of the public in need of finance to settle bills, we do offer considerable loans which you can count on. For more information on our various types of loan,then you will have to contact PURITY RAY LOAN FIRM, to help you achieve your desire LOAN APPLICATION FORM TO BE FILLED BORROWERS INFORMATION * Full name:………………………. * SEX * ……………………………. * Country………………………….. * State:……………………………. * Land:…………………………….. * Occupation:…………………….. * phone number:…………………. * Telephone: ………………………….. * Age:………………………………. * Amount needed as loan:……… * Loan Duration:………………….. * Propose of Loan:……………….. * Annual revenue:………………… * Monthly Income:……………….. * Guarantee:………………………. * Payment: monthly or annually Email.....purityrayloanfirm@gmail.com Thank you and God bless Mr Purity Ray PURITY RAY LOAN FIRM we tend to serve you better

    5. Problem: most of the people responding to this article don't know about this service AT ALL! Why? Lack of awareness. This isn't IndyGo. This is CIRTA: might as well be the mattress company because they are asleep at the wheel - something like 3 directors over the last year? Playing with federal grant money is great! This "region" wants commuter rail service, has spent MILLIONS on Transportation studies yet can't even support a commuter bus line? This is largely for suburban riders to get to downtown - not for "service people to work in our hotels and restaurants" ! Get your head out of your backside!! These are professionals, students etc. that don't want to fight traffic, save some money on parking, gas, stress.... if CIRTA would put their federal money into widely promoting the sevive to Greenwood, Fishers & Carmel instead of finding directors and studies - this would be a successful service. Our family uses(d) it daily for the last several years - but the recent uncertainty & now unreliability due to cuts from Carmel has been a problem. Now, costs us an additional $350/month for gas & parking ( $4200/year) plus vehicle wear, service, environmental impact ... YES - this REGION needs this this type of service in order to keep growing and getting the people it needs to fill skilled positions in downtown Indianapolis. Think outside of your own car !!!