Health Insurance Giants Off to Rocky 2014: Obamacare vs. Affordable Care

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Health insurance providers are not having a good start to 2014. The Affordable Care Act, or Obamacare, is not bringing in enough young subscribers to offset the costs of those who are in their forties, fifties, and sixties. This is going to bring a bad impact to the health care insurance providers if this is not remedied. Insurers, and those insured, are going to be openly referring to the new health care insurance environment as Obamacare rather than Affordable Care.

Many of the health insurance leaders were trading higher on Tuesday with the broad market. This just masks the poor performance seen from the sector in 2014.

Health insurance professionals and executives were originally voicing at least some reluctant support for Affordable Care before the government’s health care website debacle in late 2013. Now many health insurance professionals say that the site is not fixed, even if it not as bad as it was. But by having to stomach endless financial losses, the promise and reality is that they are starting to signal far higher insurance rates ahead.

Aetna Inc. (NYSE: AET) recently said it expects to lose money on the government exchanges. That may seem hard to understand since the plan interest has risen in recent weeks, but the demographics being skewed to older patients and patients more in need of constant health care is hurting the results of the 135,000 or so that Aetna has signed up so far.

UnitedHealth Group Inc. (NYSE: UNH) is at $70.50, down 6.4% from the end od 2013, but the stock is down is almost 9% from its 52-week high of $77.33. This is the Big Kahuna of insurance, with some 90 million or so members. Its market cap is $71.6 billion, and United is so relevant and large that it is a Dow Jones Industrial Average component.

WellPoint Inc. (NYSE: WLP) is at $85.98, down 7% since the end of 2013. This is actually down about 9% from its 52-week high of $94.36. WellPoint’s total medical enrollment membership was approximately 35.7 million at the end of 2013. Its 2013 earnings per share rose 13 percent to $8.52 per share, but its 2014 projection is for earnings to be “above $8.00″ per share. WellPoint is worth almost $26 billion.

Aetna Inc. (NYSE: AET) trades at $66.00 and its stock price is down only about 3.5% from the end of 2013. Aetna is down 8.5% from its 52-week high of $72.16. Aetna ended 2013 with 22.2 million members at December 31, 2013, a 22 percent increase over year-end 2012. Aetna is worth over $24 billion in market cap.

Cigna Corp. (NYSE: CI) is at $77.15, and its stock price is down almost 12% since the end of 2013. This stock is down the worst of the group — with a drop of nearly 15% from its 52-week high of $90.63. The company signaled growth in 2014 after growing in 2014 as well. Cigna’s market cap is worth over $21 billion.

Humana Inc. (NYSE: HUM) trades at $97.20, and that puts the stock down almost 6% since the end of 2013. We saw that Humana was down almost 8% from its 52-week high of $$105.80. Humana looks like it has signaled earnings decline in 2014 if you include the costs for government and state-based contracts. Humana is worth close to $15 billion in its market capitalization.

The largest insurers are understandably starting to show their disdain for the new government-mandated health plans as they exist today. After all, what was promised under the new health care law has not exactly worked the way it was supposed to — “you can keep your existing health plans if you want.” These companies are effectively being turned into regulated utilities on their revenue side without any caps and limits on the expense side of their business. The public might want to consider this as well too, because these top providers mentioned above alone have a value of about $157 billion combined.

eHealth Inc. (NASDAQ: EHTH), which operates the eHealthInsurance website, recently came out pointing to the myths and realities under the new law. This stock was getting a huge boost from the government’s website problems because it sold qualifying plans. This company’s CEO has now publicly withdrawn his support for Obamacare. Shares rose from the $20s to above $63.00 at the peak in January. Now shares are down at $43.75, down just 6% from the end of 2013 — but down a whopping 31% from the peak price of $63.32 in mid-January.

Where all of this gets interesting in the public is that the public has always had a disdain for the health care insurance providers. After all, the insurance side denies claims and they are the financial interface for the public’s access to health care.

Insured members of the public will not be able to rationally be angry at their health insurance providers going forward after 2014 for the expense of health care. The insurance companies have to pay out a minimum of 80% of their premiums in claims on small and individual plans, and they have to spend 85% of premiums on large groups. With high medical loss ratios, the insurance companies are not being given any caps on any group expenses nor on any individual expenses.

The big worry for much of the public is a single-payer system. Some of the public would cheer this for the profits to be taken out. Others in the public believe that this would be nothing short of a total takeover of health care — with so-called death panels and other restrictions that would limit care.

This is not the death of the health care insurance providers, but 2014 is getting off to a rough start for the insurers — even if the stocks were participating Tuesday’s Janet Yellen inspired stock market rally.

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