Obamacare exchanges will begin to open across the United States next month, but according to CNN, some of the biggest insurers in the United States will likely not offer their products just yet. The problem, according to the article, is the constant carrier of strife and boon to insurers: uncertainty. This time they’re sitting out the first round.
According to the piece, some of the largest insurers in the United States, like Aetna Inc (NYSE:AET), UnitedHealth Group Inc. (NYSE:UNH) and CIGNA Corporation (NYSE:CI), will avoid the insurance markets when they first open, and take a wait-and-see approach to the new health insurance reality of the United States.
Alluvial Fund performance update for the month ended May 2021. Q1 2021 hedge fund letters, conferences and more Dear Partners and Colleagues, Alluvial Fund, LP returned 5.4% in May, compared to 0.2% for the Russell 2000 and 1.0% for the MSCI World Small+MicroCap . . . SORRY! This content is exclusively for paying members. SIGN UP Read More
Uncertainty killing insurance
Uncertainty is the reason that the insurance business exists. That doesn’t mean that the companies in the health insurance industry are willing to take any risk they find—they’re used to making educated guesses with actuarial models. There’s no model for the advent of Obamacare just yet, and the insurers are looking to avoid ineffable chance.
Aetna Inc (NYSE:AET) has pulled out of healthcare exchanges in Maryland, New York, Georgia, Ohio and Connecticut. When the company decided not to offer plans on the New York Exchange, it said, “We believe it is critical that our plans not only be competitive, but also financially viable, in order to meet the long-term needs of the exchanges in which we choose to participate.”
UnitedHealth Group Inc. (NYSE:UNH) says that it is going to limit its action in Obamacare exchanges next year in order to figure out the new type of market it will have to deal with. The Obamacare program should increase the premiums received by insurers, by expanding their base, but that expansion comes with risks.
Some of the big insurers are risk averse because they could open themselves up to millions in losses by taking on thousands or millions of new customers who do not have the right premium price. The massive expansion in the insurance business brought by Obamacare is not necessarily a bad thing, but it brings with it risks for the months and years ahead.
The economic reality of Obamacare is too complex to fathom, and with discourse so divided along political lines it is difficult to know which experts to believe. Like it or not, the program is coming into effect next year. Unlike insurers, most Americans cannot opt out.