"Any hopes of a roll-back of the 2% Medicare sequestration cuts were dashed as more details of the plan were revealed over the course of the evening," Deutsche's Scott Fidel notes, referencing the new U.S. budget agreement.
"In fact," Fidel continues, "under the budget deal the 2% Medicare payment cuts will actually be extended by two years through 2023."
Nevertheless, Deutsche doesn't think anyone was expecting much in the way of a roll-back anyway, and as such, the bank sees limited impact for MCO names.
The government's HealthCare.gov Web site for Obamacare was failing to accurately transmit around 10% of applications to insurers - as of Friday - although that represents a vast improvement on the error rate in October.
Still, up to 25% of the enrollment records for people who bought coverage in October and November could contain mistakes, raising doubts about whether those customers would be insured if the policies take effect from January 1, as scheduled.
Meanwhile, insurers are working with the Centers for Medicare & Medicaid Services (CMS) on a short-term back-up system that will enable the government to pay the firms for the income-based subsidies that many consumers qualify for under Obamacare.
The White House said yesterday that it has achieved its target of improving the HealthCare.gov Web site so that it works "smoothly for the vast majority of users."
Officially, the portal is now operating over 90% of the time vs 40% at some points in October, the loading time is much faster, the error rate has dropped to 0.75% from 6%, and the site can handle 50,000 users at the same time.
However, the latter claim hasn't been tested in the real world, and some in the government reportedly aren't certain the site will hold up.
The back-end systems continue to be a problem, with one result being that while some consumers believe they've bought coverage from insurers, the latter don't have any records of the transactions. One detail that the government didn't provide was how many people are completing all the enrollment steps.
The next deadline is the middle of this month, by which time consumers need to have signed up for coverage that starts on January 1.
Tomorrow is the White House's self-imposed deadline for the federal HealthCare.gov Web site to be working properly for 80% of users.
However, "navigators" whose job it is to help people sign up say that problems persist. It's "kind of hit and miss," says one, although "there have definitely been more hits lately than in the past." The COO of Enroll Alaska rates the site 4/10.
Molina Healthcare (MOH) has expressed its support. "It is easier to navigate. It's working better. It's faster," Molina said.
More problems for the portal could lead to millions of Americans to decide to forego buying coverage and swallow the fine instead.
The participation of the young and healthy is particularly important to the success of the insurance exchanges.
Should the problems continue, the government might come under pressure to extend the March 31 deadline for open enrollment, a move that insurers have warned could undermine the market.
"Because the President is looking for MCOs to work with the Administration in smoothing out the transition to the ACA, there is increasing investor perception that the sector may be to obtain some concessions in exchange for its help," UBS' A.J. Rice says, in a note on the managed care space.
Rice likes Aetna (AET +1.2%) and Cigna (CI +1.4%) based on "strong visibility on future growth, limited ACA exposure, [and] company specific catalysts," while UnitedHealth (UNH +0.3%) is also Buy-rated.
President Barack Obama might have said that consumers will be allowed to keep canceled health-insurance policies for one more year, but at least five states - including New York and Washington - won't let such plans be reinstated, as they believe it would harm their exchanges.
Many carriers are also not allowing their customers to extend their old policies, due to time constraints and other obstacles. And those firms that may reverse the cancellations have said that premiums could rise.
Of the major players, Cigna (CI) could reinstate policies, while WellPoint (WLP) is analyzing the situation.
Aetna (AET) CEO Mark Bertolini was among 15 insurance chiefs who met with President Obama and reportedly expressed concern about his one-year reprieve for people whose policies were canceled because the plans didn't meet the requirements of the healthcare law.
The fear is that the move will make it more difficult to attract the healthy customers who are seen as critical to the success of Obamacare.
The CEOs at the meeting included those of Cigna (CI), WellPoint (WLP), Health Net (HNT) and Molina Healthcare (MOH).
The meeting came after Congress passed a bill that would allow people to keep their existing policies through 2014. While the measure received strong Democrat support, it won't advance in the Senate, although members of the latter chamber have proposed similar legislation.
"Changing the rules after health plans have already met the requirements of the law could destabilize the market and result in higher premiums for consumers," says the head of the top insurer trade group. "Premiums have already been set for next year based on an assumption of when consumers will be transitioning to the new marketplace."
"The logistics of doing it with just a few days left in the policy year are extremely difficult," says a former CEO of Oklahoma's largest health system. The fix "shifts the blame and makes [the insurance companies] the culprits."
Beyond the administrative burden, Citi analyst Carl McDonald says the change presents a risk of building a less healthy and less profitable pool of insurance buyers; the potential deterioration of the exchange market will pose a risk for WellPoint (WLP), Humana (HUM) and Health Net (HNT), which pursued aggressive exchange strategies for 2014.
Fewer than 50,000 people had managed to enroll in private insurance plans via the government's problem-plagued HealthCare.gov Web site as of last week. The number represents less than 10% of the 500,000 people that had been projected.
Twelve of the 14 states that are operating their own exchanges have signed up 49,000. The total is therefore also well below the initial target, which was 800,000. The Congressional Budget Office's prediction of 7M enrollments by March seems like a distant dream.
Major health insurers are so concerned that they want to be allowed to sign up those who are entitled to subsidies directly rather than via the federal system. However, the administration isn't keen, due to privacy concerns.
Insurers: Aetna (AET), WellPoint (WLP), UnitedHealth Group (UNH), Humana (HUM), Cigna (CI), Molina Healthcare (MOH).
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$AET Barclays raised price target to $80.00 with overweight rating.
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Aetna Inc. is a health care benefit company, which offers traditional and consumer-directed health insurance products and related services, including medical, pharmacy, dental, behavioral health, group life and disability plans.