Humana’s bailout request and the shape of things to come

Humana has announced that it expects to tap into the three “risk adjustment” mechanisms provided for in Obamacare to protect insurance companies in the event of unexpectedly low enrollment and/or a risk pool skewed towards older and less healthy enrollees. Humana says it will seek between $250 and $450 million in 2014. According to Scott Gottlieb, this amounts to about 25 percent of the insurer’s expected exchange revenue.

Humana blamed the Obama administration’s decision late last year to extend grandfathering of individual market plans for the overall deterioration in the risk pool. As Gottlieb notes, this confirms that Humana (like other insurers) was counting on people from the individual market being forced to transition into Obamacare plans.

The White House almost certainly expected the same migration, despite President Obama’s repeated claim that “if you like your health insurance plan, you can keep your health insurance plan.”

Humana’s enrollment statistics offer a glimpse of how things are likely to work out under Obamacare, and not an encouraging one from the White House’s perspective. Most of Humana’s Obamacare customers are choosing “silver” plans, but the percentage of those opting for “platinum” plans is higher than expected. People who purchase platinum plans pay higher premiums in order to buy down their anticipated co-pays and deductibles. Presumably, they are “higher cost” customers, a worrying sign for Humana and for the viability of Obamacare.

Along similar lines, the mix of people enrolling in Humana plans skews toward older individuals. Only 20 percent of enrollees are below the age of 30, while 42 percent are aged 50-64.

This breakdown is consistent with earlier estimates put out by the Federal government, and spells trouble for Obamacare.

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