Cigna raises profit view on Obamacare boost
Health insurance companies are making more money than they thought they would, thanks to the Affordable Care Act.
Cigna executives Thursday morning now expect income from operations in the range of $1.93 billion and $2 billion or between $7.05 and $7.35 a share for 2014. That's an increase of 20 cents per share from previous guidance, the company said during its first quarter earnings report.
Cigna chief executive officer David Cordani said the company is performing well across all of its markets and is also moving to new strategies that encourage accountable care, paying "health coaches" and nurse care managers to help traditional medical care providers treat patients more effectively, keeping them well and in less-expensive care settings than hospitals.
Employers and the health law encourage such "population health" approaches to providing medical care, moving away from traditional fee-for-service medicine to so-called "value-based care."
And though Cigna executives maintain the insurer will lose money this year on individuals who signed up for coverage via public exchanges under the health law, executives said a surge of younger people signing up in the waning weeks of open enrollment in March and into April is good financial news.
Cordani said during a 70-minute conference call with Wall Street analysts sand investors this morning that the early buyer group was "older than our expectations . . . and bought a bit richer benefit plan."
In addition, the early buyer group in the six-month open enrollment period that began last October also had a higher usage of medical care services in the first two months of this year.
But the second wave of people who signed up for Cigna plans via the public exchanges was younger, Cordani said. "They bought leaner benefits," Cordani said.
By the end of 2014, Cigna expects 290,000 customers buying individual policies and 40 percent of them are purchasing "ACA policies," or policies subsidized under the Affordable Care Act.
In the company's first quarter, Cigna reported net income from operations of $501 million, or $1.83 per share compared to $387 million, or $497 million, or $1.72 per share in the first quarter of 2013. Revenues increased 4 percent to $8.5 billion.
Cigna is the latest insurance company telling a concerned Wall Street that they going to be able to manage the first year of risk from newly insured customers buying subsidized private health plans via government-run exchanges. Under the law, millions of Americans can get subsidies to purchase an array of health plan choices.
The improved forecast is the latest in a parade of rosy financial projections from health insurance companies benefiting from the health law. Other insurers doing well include Aetna (AET), UnitedHealth Group (UNH), Humana (HUM) and Wellpoint (WLP), a major operator of Blue Cross and Blue Shield plans under the Anthem brand that also raised its profit outlook this week.
More from Forbes
- Wellpoint Boosts Profit Forecast On Younger, Larger ACA Enrollment
- At $1,000 A Pill, Hepatitis C Drug Sovaldi Rattles Medicaid Programs
- Insurers Adding Products On ACA Exchanges May Curb Prices
Silly me, here I thought all this time Obama's plan was to make sure everyone has health insurance, now we see it is so rich insurance companies can get richer.
So glad the confusion has been clear up.
obama killed the middle class
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These companies won't soar like other plays in the sector, but they make for great income sources.
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