Summary
New pushes into the individual market by Aetna and Cigna, along with United, Humana, Blue Cross, etc prove real opportunity to capture 45,000,000 - 85,000,000 uninsured lives. The big unknown is how Not For Profit enterprise will access capital for Surplus reserves less expensively than Federal plans. For any commercial carrier to compete in a sustainable way will require equal access to capital or the state will win everytime.
Analysis
The speech last night leaves little doubt the President and Congress have the political will to pass material health reform. "We are 80% there." Obama's message of not disrupting existing INDIVIDUAL and GROUP commercial insurance has remained constant. Key to his speech was a sentence about eligibility to "some" Federal medical plan option.
It will probably require being uninsured for about 6 months. If it allows any employee to leave GROUP insurance for a less expensive Federal Plan, that means adverse selection that will quickly bankrupt commercial underwriting in 1-3 years. The President hinted at a low option plan that may be attractive only to an uninsured person, and not threaten higher priced INDIVIDUAL plan competition.
We can expect ANY plan that accepts traditionally uninsurable INDIVIDUAL people, or people with expensive preexisting conditions, to burn more than they collect in premiums. Many SCHEDULED MEDICAL plans are available now that are guarrantee issue. The key to their affordability is very limited hospital, accident or Rx limits. Obama was hinting last night about "offering some coverage to those who want to pay for it." The primary "it" is hospital care, and there is no free lunch.
We have some history to refer to. Florida had CHIPA's (Community Health Purchasing Cooperatives) with 90,000 lives until Jeb Bush crushed it. This commercially offered INDIVIDUAL and small GROUP program offered over 120 plans.
The primary driver remains CMS at over 17% of the Federal Budget. The feds must contain spending as the growth in new Medicare eligible lives will mandate it.
Look to Medicare PFFS model to guestimate federal individual plan structure and administration. (Medicare is individual too) It is voluntary for members and doctors, has an existing national plan, fee schedule and claims payment authority in place. It's prime.
Looks like big money is on Opportunity with this reform.
Shares of UnitedHealth Group (UNH.N) and WellPoint Inc (WLP.N), the two largest health insurers each edged up less than 1 percent in morning trading. Other insurers rose more sharply, with Aetna (AET.N) up more than 1 percent and Cigna Corp (CI.N) rising more than 3 percent (today)
This author consults with leading institutions through GLG
Analyses are solely the work of the authors and have not been edited or endorsed by GLG.
