The Obama administration believes health insurers fleeing the Obamacare exchanges are missing out on a great business opportunity. Investors disagree. The major health insurers that are finally pulling back from Obamacare have seen a 15% to 20% decline in their stock prices since the middle of last year, while the one insurer that signaled last year it was getting out has climbed about 15%.
Centers for Medicare and Medicaid Services Acting Administrator Andy Slavitt tweeted recently that “the economics are compelling” for health insurers participating in Obamacare exchanges. He continued, “Not many $40B new opportunities. With even modest margins/growth, big business.”
Maybe Slavitt is referring to “$40 billion” in loses, because the large health insurers have lost billions of dollars in the Obamacare exchanges.
Here’s the problem facing the BUCHAs—that is, the major health insurers: Blue Cross, United Healthcare, Cigna, Humana and Aetna.
Obamacare was signed into law on March 23, 2010. Immediately the BUCHAs’ stock prices started climbing. Investors realized that billions of federal tax dollars would start flowing to the insurers in January 2014. And many no doubt believed President Obama and his liberal and media echo chambers that the health insurers would reap sizable profits once the exchanges began operating.
- Cigna’s stock was $32.06 on April 1, 2010, and peaked at $168.06 on June 22, 2015. Today, it’s down to about $132.00.
- Humana’s stock was $45.72 on April 1, 2010, and peaked at $214.92 on June 1, 2015. Today, it’s about $178.00.
- It’s pretty much the same story for Aetna, whose stock was $29.55 on April 1, 2010, rising to $132.50 on June 25, 2015. Now it’s trading at about $120.00.
Are you detecting a pattern here? What about Blue Cross? There’s several of them, so let’s look at one of the largest. Anthem Blue Cross’s stock was $53.80 on April 1, 2010. It rose to $171.04 by June 22, 2015, and now sells for about $129.
The outlier in this pattern is United Healthcare. It was at $30.32 on April 1, 2010. It peaked at $125.00 on July 14, 2015, and then started a gradual decline, just like the other big insurers—until February 8, 2016, when it hit $110.02.
But then something interesting happened: UHC started climbing again, closing at $142.04 on August 19. What happened?
United announced last November that it was reconsidering whether it would continue selling in Obamacare exchanges. Then in January the company announced it had lost $720 million selling in Obamacare exchanges in 2015, reinforcing the speculation it would leave. On April 19 the company made it official.
The company’s stock began rising in February on expectations that it would leave Obamacare, and it has continued to do so.
Of course, there are many factors that affect a stock’s price. But the stock patterns are nearly identical for the major health insurers—except for the one that announced early on that it would leave.
Now, the other major insurers are looking for the exit door, and rightfully so. Companies have a fiduciary duty to their stockholders to maximize profits. Ignoring that duty just to avoid exposing Obamacare’s false promise of competition in the exchanges would be gross negligence.
But the companies have to be careful because they may want to continue in other profitable lines of business, such as the group market or Medicare—which are regulated by Obama bureaucrats. And the companies know just how vindictive Obama administration bureaucrats can be when Obamacare’s deceptions and false promises are exposed.