Results from insurer Centene (CNC), by far the biggest player on the ObamaCare exchanges, reveal that paid national enrollment almost certainly increased in 2018 compared to a year ago, defying predictions that President Trump's actions would lead to a sizable drop.
Centene said earnings call that it now has more than 1.6 million paid exchange customers, well above the 1.4 million-plus that the company indicated to investors on Jan. 8.
The unexpected surge in customers didn't result from late signups — since enrollment ended in most markets on Dec. 15 — but from a much bigger share of those who signed up following through and paying their premium.
Shares of Centene jumped 4.3% on Tuesday and added another 0.7% on the stock market today, boosted by better-than-expected fourth-quarter earnings and an improved outlook, thanks to ObamaCare enrollment and tax cuts.
Centene is ranked No. 2 by IBD Stock Checkup in the Medical-Managed Care industry group based on earnings, revenue, margin and stock performance trends, trailing only Dow Jones industrial average component UnitedHealth Group (UNH). With UnitedHealth, Aetna (AET) and Humana (HUM) all exiting the ACA exchanges, and Anthem (ANTM) greatly scaling back its presence, the door has been opened for Centene, which has traditionally catered to the Medicaid population, to seize a leadership position.
Fears of a substantial enrollment decline were fueled by the Trump administration's adoption of a much earlier signup deadline and its gutting of the advertising budget for HealthCare.gov, along with Republicans' successful effort to repeal the individual mandate to buy coverage or pay a fine.
Ironically, the unexpected strength in enrollment resulted from Trump's decision last fall to halt payments for cost-sharing subsidies, which the Affordable Care Act promised to insurers to reimburse their expense for dramatically shrinking deductibles and other out-of-pocket costs for low-income households who buy silver coverage.
Trump, who had the authority to end the payments funded by President Obama without a congressional appropriation, had threatened the move as an act of sabotage. But most state health insurance officials seized on advice from Urban Institute scholars to jury-rig their exchanges in a way that turned attempted sabotage into a life raft.
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Instead of raising premiums for all customers in response to the loss of cost-sharing subsidies, as feared, insurers piled all of their extra expense onto silver plans, sending only silver premiums skyward.
But while Trump ended the cost-sharing subsidies for insurers, a separate tax-credit subsidy remains in place to offset the cost of premiums that individuals pay.
And because those premium tax credits are based on the cost of the second-lowest-cost silver plans, the size of those subsidies soared, which is why many more people can get free high-deductible bronze coverage in 2018 than in prior years. The Kaiser Family Foundation estimated that 4.5 million uninsured could get bronze policies this year for no cost.
Not surprisingly, anecdotal evidence suggests an increase in the take-up of bronze plans. In Connecticut, bronze signups went from 25% of the total in 2017 to 35% in 2018.
Typically, somewhere between 70% and 80% of people selecting Centene plans during the open-enrollment period would eventually pay a premium, CEO Michael Neidorff said on Tuesday, according to a Seeking Alpha transcript.
But this year, he noted, "we had a much higher percentage convert and pay the premium."
Given that the number of people signing up for exchange coverage came in at more than 96% of last year's total – 11.8 million vs. 12.2 million a year ago, according to ACASignups.net – the experience of Centene, whose large presence makes it a strong indicator of national trends, suggests that paid enrollment will top last year's total of 10.2 million.
The wider availability of free bronze plans surely goes a long way toward explaining the higher share of enrollees who paid the premium they owed – if they owed one. The higher subsidies also likely enabled more people to buy lower-deductible gold plans for little more than the cost of silver. California reported a big increase in the take-up of gold plans, with a more modest increase in bronze coverage.