Wednesday, July 27, 2016

Thank You Sir, May I Have Another?

In the movie Animal House a young actor (Kevin Bacon) played the part of Delta House pledge Chip Diller. As part of the initiation ritual, pledges had to subject themselves to humiliation by assuming the position and being whacked in the butt with a paddle. 

Most of the main characters in Obamacare either decided not to pledge or have flunked out.

While most of the carriers have lost money by the buckets, a few have thrived in the Obamacare market and are coming back for more.

Centene has learned how to make money in the Medicaid market. A combination of lean plans and even leaner networks seems to be a winning combination when serving up health insurance on the dollar menu. That same approach works well in the Obamacare market.

At the same time, carriers like United Health Care, Assurant, Humana and others were losing money by offering prime rib to the bologna crowd.

You can count Health Net in the loser bunch.

Then along comes Centene who gobbles up the Arizona and California business written by Health Net. That move created financial indigestion for the otherwise profitable Centene.
Centene's ACA exchange profits remain “at the high end of our targeted range,” but acquiring Health Net dragged the company down 
Specifically, the losses were tied to “unfavorable performance” in Health Net's Arizona and California individual markets. That included a lack of risk-corridor funding and detrimental effects from the “grandmothering” of older, pre-ACA plans, which means they only had to comply with some of the ACA's standards. Health Net also has PPO plans with broader networks of hospitals and doctors, which often appeal to sicker people who are willing to pay higher premiums if it means their providers are in-network. Conversely, Centene offers more high-deductible, narrow-network plans with cheaper premiums, plans that attract price-sensitive consumers. - Modern Healthcare
But not to worry. Centene will correct the problems caused by the stupidity of Health Net when 2017 rolls around.

Come 2017, Health Net won't be playing in the Obamacare market while Centene will only offer plans in a few markets. Residents can say goodbye to rich plans with broad networks. They will be replaced by a much leaner fare.

So while Health Net bails, Centene says "Thank you sir, may I have another?".

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