Humana CEO: New competition curbs Obamacare plan prices

Reuters News
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Posted: Sep 17, 2014 5:38 PM

By Caroline Humer

BOSTON (Reuters) - New competition between health insurers offering so-called Obamacare plans in 2015 is having an impact on the pricing of such coverage, based on a first look at proposed insurance premiums, the head of Humana Inc said on Wednesday.

The state insurance exchanges offering coverage under the Affordable Care Act. President Barack Obama's landmark healthcare law will begin enrolling customers for 2015 benefits in mid-November. Now in its second year, Obamacare is attracting health insurers to offer plans in more states after over 8 million people enrolled for coverage in 2014.

The country's largest insurer, UnitedHealth Group Inc, sold Obamacare plans in only a few states in 2014. But for 2015, it will sell plans in about two dozen states. Aetna Inc, Cigna Corp, WellPoint Inc and Humana have said they would stick to most of their markets.

"United is coming in. There is more competition coming into the marketplace. It's going to make us all a little bit more competitive," Humana Chief Executive Officer Bruce Broussard said in an interview.

He said that larger insurers are pricing their premiums within a narrower range of about 10 percent in many markets. That strategy contrasts with 2014, when Obamacare plan pricing showed much greater variation.

Humana will sell plans in 15 states for 2015 and has asked for premium rate increases of 3 percent to the 20 percent range, depending on the market.

Last year, large insurers were hesitant to enter the new marketplace, concerned by conservatives' political opposition as well as federal regulations that required that the plans be available to any individual regardless of age or health status.

When the exchanges first launched in October 2013, technology failures crippled the federal enrollment website, Healthcare.gov, and many websites run by individual states. But as the government fixed those problems, enrollment came in ahead of forecast.

Now many insurers expect their Obamacare business to have profit margins of 2 percent to 3 percent within a few years, based on government forecasts for the market to grow to 13 million people in 2015 and 25 million by 2017.

Broussard said insurers may grapple with customer churn as consumers seek better prices as well as more technology problems as existing customers try to re-enroll either in the same plan or in a new plan for 2015.

Humana, which has about 700,000 members enrolled in Obamacare plans, has a large business providing medical benefits and prescription drug plans under the Medicare program for the elderly, and sees a risk posed by pricey new drugs expected to reach the U.S. market in the next few years.

Insurers are already calling for a change in how new drugs are priced after paying more than they expected for Gilead Sciences Inc's new $84,000 Hepatitis C treatment. New personalized treatments for cancer and an experimental class of cholesterol fighting drugs are seen inflating those costs further.

"We've had a great trend over the last couple of years in healthcare cost staying flat or decreasing," Broussard said. "If these drugs come out at the price they are, I think you are going to see a reversal of that."

(Reporting by Caroline Humer; editing by Michele Gershberg and G Crosse)