Sep 24, 2020
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Why Are Centene And Molina Making Money On The Obamacare Exchanges?

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This paragraph in a recent AP story caught my eye: Two companies that report exchange success thus far Molina Healthcare Inc. and Centene Corp. say they have focused on covering low-income customers in markets where they already have an established presence in Medicaid the state-federal program that covers the poor

 

Molina sells coverage in nine states and is thinking about adding two for next year. Why are these traditionally Medicaid health insurers doing so well when many of the health plan market is losing their shirts inside the Obamacare exchanges? The answer has to do with two things. First the longtime medical health insurance underwriting principle is that to be financially sustainable any group or program must attract 75% of the eligible group to guarantee getting enough healthy people into the underwriting pool to pay the costs of the sick

 

Get 75% of the eligible and you’ll have a sustainable program. And here is the second one thing that explains why these primarily Medicaid players are doing well. It is a 2015 chart that breaks down the Obamacare exchange market by income as a percentage of the federal poverty level

 

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The Future Of Retail: How To Achieve Organizational Fitness Centene and Molina are primarily Medicaid market players–that is where their core business is

 

After they entered the exchanges they did so with provider networks that were built upon their Medicaid networks. And their historic customers are people who float into and out of Medicaid. It was a natural fit for them to craft Obamacare exchange products that targeted this quasi Medicaid market. In doing so what kinds of customers did they attract? The lowest income customers not offended by cheaper price narrow networks and by a firm whose brand they know from past experience in Medicaid

 

This lowest income part of the market is also eligible for the best premium subsidies and lowest out-of-pocket costs that Obamacare offers. In other words these people find the Obamacare exchange offerings affordable–both in terms of premiums and out-of-pocket costs. And what number of this lowest income part of the Obamacare exchange market has signed up for Obamacare? 75%

 

We recently heard that UnitedHealth and now Humana are reducing their involvement inside the insurance exchanges simply by their unsustainable losses. What is their core market? It’s the employer market and their potential customers for the Obamacare exchanges are a natural extension of that market. These people tend to be higher in income and more worried about broader provider networks having come from traditional employer-based insurance

 

And what’s the participation coming from their traditional customer base with higher incomes? As you may see from the chart dismal and plenty under 75%. I have been repeatedly making the point that for Obamacare to be sustainable we have to get plenty closer to that 75% historic underwriting standard–in all income categories–by creating medical health insurance products that folks want to buy before this thing has a chance of being sustainable

 

I am going to suggest that Centene and Molina were either very smart or very lucky which will proving my point. But then some people think we just have to stand by and watch the health plans give a couple of more years of huge rate increases to make the insurers happy and willing to remain inside the Obamacare exchanges

 

But I fail to notice how these same medical health insurance plans costing 30% or 40% more will make the shoppers happy

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