Centene Not Affected by Lack of Health Insurance Subsidies

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By Sara Hansard

The lack of government funding for health insurance subsidies for low-income people won’t affect Centene Corp., which has the largest number of members in the Obamacare exchanges, the company told Bloomberg Law March 20.

A Republican Obamacare stabilization plan that included the funding for insurers to cover cost-sharing reductions for low-income people wasn’t included in the omnibus spending bill that Congress must approve to avoid a government shutdown, and unless provisions are added in the Senate, that could be the last chance for Congress to act before the Affordable Care Act sign-up period begins next fall. Health-care securities analyst Ana Gupte said in a March 20 report that Centene would be the most affected of the health insurance companies without the stabilization plan, with Anthem Inc. and Molina Healthcare Inc. affected to a lesser extent.

Congressional Democrats and Affordable Care Act supporters came out swinging against the Republican plan to stabilize the exchange markets. Pro-ACA groups, such as Families USA, argued that providing insurers with funding to cover cost-sharing reductions (CSRs) for low-income people, which the Trump administration ended in fall 2017, would cause “severe rate shock” for exchange enrollees who benefited from the resulting higher premium subsidies in 2018.

Centene Not Affected

“The lack of CSRs does not affect Centene as our population uses premium subsidies, which are part of the Affordable Care Act, to cover their costs,” company spokeswoman Marcela Manjarrez Hawn told Bloomberg Law in an email. “The lack of CSRs in no way impacted our growth in 2018, in which we added over 400,000 recipients year-over-year,” she said.

Centene is the largest Medicaid managed care organization in the U.S., and Medicaid managed care companies tended to do better in the exchanges than other commercial plans. As of Dec. 31, 2017, 7.1 million of Centene’s 12.2 million members were in Medicaid managed care, according to the company’s latest earnings report.

Seventeen percent of Centene’s earnings are from the exchanges, according to Gupta, senior analyst, health-care services at Leerink Partners. A majority of the membership receives premium subsidies, but continued lack of funding for CSRs will result in nonsubsidized members leaving the marketplaces due to premium increases, she told Bloomberg Law in an email. “This hurts the stability and affordability of the players,” such as Centene, as they won’t experience growth in the exchange markets, she said.

Leerink Partners is a health-care investment bank headquartered in Boston. Gupte is in New York.

Anthem and Molina

Anthem and Molina had previously been major players in the exchanges. But they retrenched in 2018 because the exchange plans weren’t profitable, Gupte said. If stabilization measures are passed by Congress they could increase their exposure for 2019, she said.

The Tax Cuts and Jobs Act of 2017 repealed the penalty for not having coverage under the ACA’s individual mandate. That is expected to raise premiums by 10 percent, Molina spokeswoman Laura Murray told Bloomberg Law in an email. Molina, headquartered in Long Beach, Calif., is also a major Medicaid managed care company.

“Some of the premium increase would be offset if Congress were to appropriate funds for Cost Sharing Reduction (CSR) subsidies, and establish and fund a reinsurance program,” Murray said.

CSR Impact

“Without future CSR payments, Molina expects to see premiums continue to increase and coverage will become unaffordable for many members, especially those not eligible for subsidies. This may lead more consumers to exit the Marketplaces, which in turn will undermine the risk pool,” Murray said. “Molina is supportive of bipartisan efforts to stabilize the individual marketplace including funding for reinsurance programs or invisible risk pools, funding for CSRs, and streamlining the ACA’s section 1332 waiver process to give states more flexibility,” she said.

The risk pool refers to the share of healthy people and people who have high-cost claims. When healthy people leave the market, the higher share of people with high-cost claims leads to higher premiums. Reinsurance provides funding to insurers to cover people with high claims. Section 1332 of the ACA allows states to apply for waivers if they can provide coverage as comprehensive and affordable to a comparable number of residents, and it doesn’t increase the federal deficit.

Anthem Inc. spokeswoman Leslie Porras said the company is “not providing comment.”

Republican Plan

The plan proposed by Senate Health, Education, Labor and Pensions Committee Chairman Lamar Alexander (R-Tenn.), Sen. Susan Collins (R-Maine), House Energy and Commerce Committee Chairman Greg Walden (R-Ore.), and Rep. Ryan Costello (R-Pa.) includes $30.5 billion of reinsurance funding from 2019-2021, funding for the cost-sharing reductions through 2021, greater flexibility for 1332 waivers, a provision allowing everyone to buy catastrophic coverage, and a requirement that the Department of Health and Human Services issue regulations allowing insurers to sell plans across state lines.

The plan would reduce premiums in the individual market about 10 percent in 2019, on average, and in 2020 and 2021 premiums would be about 20 percent lower, according to a March 19 report from the Congressional Budget Office.

Democrats opposed language in the proposal restricting money from going to plans that cover abortions.

To contact the reporter on this story: Sara Hansard in Washington at shansard@bloomberglaw.com

To contact the editor responsible for this story: Kendra Casey Plank at kcasey@bloomberglaw.com

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