Health Costs Are Still Tame, Insurer Results Show

Some give all the credit to Obamacare. Others cite the poor economy or employers forcing workers to bear more of the cost of their medical expenses. Whatever the reason, health-cost increases stayed tame through the first half of the year, insurers say. Thursday’s report from Cigna was the last dispatch on second-quarter financial results from major medical carriers. Cigna’s results were similar to those of its rivals: higher-than-expected profits thanks largely to moderate increases in medical prices and the number of medical procedures.

Insurers also shed new light on how they’re dealing (or not) with the new online health marketplaces, also called exchanges, set up by the health law; the enduring popularity of Medicare Advantage plans despite government payment pressure; and continued moves by employers to self-insure their health costs, letting them avoid some Affordable Care Act rules and taxes. Here is the earnings news that didn’t make the headlines:

– Every insurer reported moderate cost increases. Some lowered already low projections. Aetna estimated that cost increases for for its commercial insurance lines would be about 6 percent for 2013. WellPoint projected 6.5 percent for the year. Cigna projected 5 percent to 6 percent — a full percentage point lower than the previous estimate.

Before the economic slowdown, some carriers’ annual medical costs increased at close to double-digit percentages. “Medical trends continue to develop lower than our previous projections,” said Shawn Guertin, Aetna’s chief financial officer. (Thanks to Seeking Alpha for the transcripts.)

As to what’s causing it, Aetna CEO Mark Bertolini suggests that consumers delay seeking care when money is tight: “While structural changes in the health system may be playing a modest role in the low-cost trend we are experiencing, we continue to believe that this low utilization is largely driven by the weak economy,” he said. 

– WellPoint projected a huge increase — 750,000 — in members whose claims will be paid directly by their employers by the end of 2014. (WellPoint makes money processing the claims.) WellPoint implied it’s taking the business from rivals. But other carriers also reported increases in self-insured employers.

Cigna sees “great progress” in processing claims for self-insured companies with from 51 to 250 employees, as well as more competition for that business. “Employers are seeing this as an attractive alternative” to conventional insurance, said Cigna CEO David Cordani. Employers who self-insure are exempt from the health law’s premium taxes, which are estimated to raise prices from 2 percent to 4 percent, as well from from some rules governing benefit levels.

– Despite a victory this year that reversed imminent government cuts, Medicare Advantage plans — managed care for Medicare members — still face funding reductions required in the Affordable Care Act. Some once speculated these would lead to Medicare Advantage’s diminishment or demise.

Not at Cigna. “Our expectations are unequivocally to grow our customer base further in 2014,” Cordani said Thursday. Not at UnitedHealth Group. “We remain committed to Medicare Advantage as the most valuable and fastest-growing Medicare benefit offering available to American seniors,” said CEO Stephen Hemsley. Not at Humana. “We continue to anticipate growth in individual Medicare Advantage membership in 2014,” said CEO Bruce Broussard.

– Aetna’s Bertolini suggested he’s not prepared to accept Maryland’s final premium rates for Obamacare exchange plans as really final. Last week, Maryland regulators sharply cut proposed premiums for plans to be sold through the subsidized online marketplaces known as exchanges. Average premiums for Aetna’s plans were cut 29 percent. Asked by a stock analyst whether the company would sell insurance at those prices, Bertolini implied that the negotiations aren’t over.

“We generally do not negotiate our rates with states in the [news]paper,” he said, declining to get into specifics. “So I would argue that the current information that’s in the public domain is in mid-process. We have not committed to the rates, nor will we see ourselves committing to those rates anytime at this point.”

– Humana portrayed its expansion in Mississippi as a potential profit opportunity, or at least one that won’t lose money. After pressure from Mississippi officials and presumably Washington, Humana agreed last month to sell subsidized health plans in dozens of poor, rural Mississippi counties that otherwise might not have had any offerings sold directly to individuals and families through online exchanges.

But since Humana won’t have any competitors in those places, Broussard suggested, it can set rates relatively high. (Even at higher rates, tax credits limit what consumers will pay, depending on their income. Federal taxpayers make up the difference.)

“Well, first thing is considering the population there, it was the right thing to do, I think, for us to go into that marketplace and to offer the insurance on the exchange side,” Broussard said. “In regards to how we approach it, it is a market that, since there will be only us in that marketplace, it does offer the ability to have a fairly reasonable rate there.”