Dear Valued Visitor,

We have noticed that you are using an ad blocker software.

Although advertisements on the web pages may degrade your experience, our business certainly depends on them and we can only keep providing you high-quality research based articles as long as we can display ads on our pages.

To view this article, you can disable your ad blocker and refresh this page or simply login.

We only allow registered users to use ad blockers. You can sign up for free by clicking here or you can login if you are already a member.

WellPoint, Inc. (WLP), Health Net, Inc. (HNT): Will Obamacare’s California Victory Carry Over?

Page 1 of 2

I will admit: I’ve tried hard to stay out of the debate that has raged on for years around the Patient Protection and Affordable Care Act, commonly known as Obamacare. I am not an insurance actuary, nor a doctor; trying to understand all the different facets of the law can be a dizzying prospect.

WellPoint, Inc. (NYSE:WLP)One thing I am, however, is an American citizen who has to purchase individual health insurance to cover my family and myself. So I’ve been keeping a close eye on what will happen to individual insurance rates in Wisconsin — my home state — as the insurance exchange is set up within its borders.

It turns out, if what we’re seeing out of states like California prove any trend, many Obamacare opponents have been wasting a lot of hot air on doomsday predictions of unaffordable premiums.

A surprise from out west
Back in 2009, the Congressional Budget Office predicted that a middle-of-the-road “silver” health insurance plan would cost about $5,200. A separate study by Miliman, an actuarial firm, backed up these findings. It said that a silver plan in California would run about $5,400 per year.

As it turns out, both were off… by a lot. Last week, Covered California, the state’s mandated exchange for individual insurance plans, announced the rates that its participants were offering. The average cost of a silver plan in California is about $3,300 per month — or roughly 40% less than what the professionals predicted.

It turns out that when given the chance to gain exposure to millions of younger uninsured people, insurance companies were more than willing to offer reasonable rates in order to gain market share. And since the exchanges are set up to compare apples-to-apples benefits, companies are highly incentivized to offer affordable policies.

Will it carry through?
Other Fools have already covered much about this topic. Keith Speights wondered aloud if the ultimate winners would be companies that chose to participate in the plan — like WellPoint, Inc. (NYSE:WLP) and Health Net, Inc. (NYSE:HNT) — or those that opted not to.

Sean Williams, on the other hand, opined about how the lack of participation from Aetna Inc. (NYSE:AET), CIGNA Corporation (NYSE:CI) and UnitedHealth Group Inc. (NYSE:UNH) revealed a possibly huge problem: The industry’s biggest players didn’t think competing for these plans was worth it. Sean points out — but I don’t think gives enough credence to — the fact that these three companies are far, far more focused on group health plans than individual ones. Together, these three insurance giants accounted for only 7% of California’s individual health policy market.

Page 1 of 2
Loading Comments...