Insurance companies’ financial success will depend on how they navigate through the new healthcare reforms of the Patient Protection and Affordable Care Act–particularly the new medicaid and medicare services, and the new health insurance marketplace.
“WellPoint Inc (WLP.N), the nation’s second largest health insurer, sees President Barack Obama’s healthcare reform giving a $20 billion boost to its revenue by 2016, led by an expansion of the Medicaid program for the poor and the introduction of subsidized coverage for the uninsured,” reported Rueter in July.
Wellpoint is an insurance company that provides a variety of different health care plans and recently acquired Amerigroup, a leading medicaid provider.
WellPoints 2013 second-quarter financial report showed an early trend of growth with the net income raising to $800.1 million, or $2.64 per share, from $643.6 million, or $1.94 per share, from the previous year.
As the new health insurance markets open, health insurance stocks, like WellPoint, will get to see if the predicted expansion and their investments in new healthcare reform will payoff.
“With Amerigroup, WellPoint’s affiliated Medicaid health plans now serve approximately 4.5 million beneficiaries of state sponsored healthcare programs in 20 states, bringing the company’s total medical enrollment to approximately 36 million members in all affiliated plans. WellPoint also now has a presence in several states with significant dual eligible managed care opportunities,” stated WellPoint in a 2012 press release.
Medicaid is a state-run health insurance program that is partially funded by the federal government and provides health insurance for, low-income families and children, pregnant women, the elderly and people with disabilities. The ACA provides states with funds to expand state medicaid coverage if they choose.
“The ACA expands Medicaid coverage for most low-income adults to 138% of the federal poverty level,” reported the Kaiser Family Foundation.
Twenty-three states and the District of Columbia have passed legislation to expand Medicaid. To manage these state-run program, many states chose to hire private insurance companies to handle the growing number of Medicaid recipients, reported Johanna Bennett for Barron’s.
The ACA also will increase incentives for insurers to invest in Medicare. Medicare is federally funded health insurance that covers adults over the age of 65, people with disabilities and people will end-stage renal diseases.
“The Center for Medicare and Medicaid Services announced plans to increase the amount the government pays to insurance firms for its Medicare Advantage plan,” CNN Money reported. “Payments to insurers under Medicare Advantage will increase by 3.3% in 2014.”
Health Insurance Marketplace
In addition to Medicaid and Medicare expansion, the ACA is predicted to expand the health insurance market through legislation that requires all U.S. citizens to have health insurance by 2014, or pay of fee. To expand the number of health insurance options a new online health insurance marketplace opened Oct 1.
Insurance companies filed to participate in state or the federal health insurance marketplaces, and are offering plans targeted at people who are currently uninsured because they can not afford health insurance plans or previously did not qualify for coverage.
An increased number of people buying health insurance could increase health insurers profit, but will also increase health coverage cost. In anticipation of additional cost some insurance companies raised premium costs on their current insurance plans.
Health insurance stocks, like Wellpoint, must decide how their services and investments can be utilized in new health insurance marketplaces to capitalize on the changes and growth being made in the insurance market.