Humana Inc., the nation's fourth-largest health insurer by market share, warned Thursday that the risk pool of applicants for insurance through President Obama's health care law would be worse than previously expected.
Ever since the botched rollout of the health care law's exchanges in October, the policy community has been eager to know more about the mix of individuals signing up for insurance through the law.
Because the law forces insurers to cover those with pre-existing conditions, insurers need to attract a critical mass of young and healthy individuals with lower medical costs into the exchanges to offset the cost. But the Obama administration has yet to release demographic data on those who have picked a plan through the exchanges.
But in a filing with the Securities and Exchange Commission, Humana disclosed to investors, "as a result of the December 2013 federal and state regulatory changes allowing certain individuals to remain in their previously existing off-exchange health plans, the Company now expects the risk mix of members enrolling through the health insurance exchanges to be more adverse than previously expected."
The regulatory change Humana is referring to is the "administrative fix" announced by the Obama administration aimed at allowing individuals to remain enrolled in their current plans, which had been cancelled as a result of requirements imposed by the law. Obama announced the "fix" after a storm of criticism over his broken promise that anybody who liked their plan could keep it. Insurers had been depending on those with cancelled plans (who tend to be healthier) to end up obtaining insurance through exchanges.
Humana said that the company was "evaluating" the financial effects of the changes, but at this time, did not adjust their earnings forecast for 2014.
In the same filing, Humana said cuts to Medicare Advantage payments to private insurers made by the health care law would be steeper than expected, triggering changes to benefits.
"The Company expects to continue its standard process of seeking alternatives to minimize the disruption to Medicare beneficiaries this level of rate decline may cause," the filing read. "Such alternatives include clinical management programs, operating cost efficiencies, benefit changes, market exits and other operating strategies. In the interim, the Company also expects to continue its efforts to educate CMS, the Administration and Congress on the adverse impact such rate pressures have upon Medicare beneficiaries."