Healthplan stock prices climbed yesterday as a Goldman Sachs analyst upgraded his view on the entire sector, concluding “Key to our view is that an end to health reform uncertainty (in a better-than-worst-case outcome) will be a positive catalyst, bringing investors back into the sector…”
Meanwhile, another analyst downgraded the sector, albeit from “overweight” to “market weight”.
I didn’t get it last month, and I still don’t get it. Unless these gentlemen are just looking at the next few quarters or couple of years at most, their recommendations, even the modest downgrade, don’t jibe with the future for health plans under reform.
Which is pretty damn bleak.
Health plans will be forced to take all comers in the individual market. The penalties for individuals not enrolled in healthplans are essentially insignificant in the Senate bill (starting at $95 individual, $285 family in 2014, increasing over two years to $750 individual/$2250 family), and somewhat tougher in the House bill (2.5% of income).
Pray tell me, with individual premiums above $5,000 and family above $15,000 today, how exactly is a penalty that is going to be less than 15% of the cost of a health insurance policy going to force anyone to buy coverage? Especially when the underwriting restrictions will allow those non-members to sign up whenever they get the flu, fall down skiing, discover they’re pregnant, or contract ebola.
No, what we’ll have is what’s happened – already – and is continuing to happen in Massachusetts – people enroll when they need care, stop paying premiums when they’re better, and health plans are getting murdered.
Perhaps the analysts are not concerned about what happens in 2014, or they are thinking the employer plans will provide enough margin to make up for sure losses in the individual sector. Perhaps they don’t think Congress will pass legislation establishing taxes on excessive health plan profits, or require plans to pay a minimum percentage of premiums towards medical care. Perhaps they’ve bought in to the greater fool theory.
Or perhaps their view is the bad news has been exaggerated, and the problems health plans have had of late are over and better times are coming. Those bad times include big losses in membership, with especially high disenrollment among commercial members.
I don’t see commercial membership increasing any time soon, not with the recent announcement by Aetna that it expects to lose up to 650,000 members in 2010. Those people will need coverage, and the current ‘reform’ bills will allow those people to purchase coverage on an ‘as needed’ basis.
What does this mean for you?
Something to ponder as you view your portfolio.
Dec
8
Joe–
Any investment in any aspect of health care has to be short term. Long term, we all know that we cannot afford the health care we have, let alone the health care we will need as the 65+ demographic explodes. Gravity has not been repealed. The percentage of the GNP sucked up by health care has to go down if the US is to remain viable economically, so all aspects of health care right down to Doc Welby will be squeezed unmercifully in years to come. And, yes, care will be rationed. No one will call it that, but it will happen anyway.
Our employer group was hit with a 40% increase in premiums for 2010 for our current BCBS policy, which we cannot afford. So that means loss of our groups membership, as we enroll in another plan. This isn’t as “as needed” situation. If we couldn’t have found a plan to take us for a reasonable rate, all of our employees would have been uninsured come January ’10. The real penalty would be if we couldn’t afford to be insured.