Dive Brief:
- As the Affordable Care Act comes under fire from Republican presidential candidates heading into an election year, executives for Centene sought to soothe investors that the legislation would remain the law of the land.
- “If you look at the political history of major healthcare benefit programs, once you giveth you cannot taketh away. Not only is it politically complex to eliminate programs people rely on, but it is also politically unlikely for there to be major proactive reform as one of the parties would have to control both the House and Senate as well as the White House,” said Jon Dinesman, Centene executive vice president of external affairs, during the insurer’s investor day on Tuesday. “We see this as highly improbable.”
- During the event, Centene zeroed in on a relatively new program that it expects to spur ACA growth by allowing the insurer to snag members from the lucrative employer health benefits market as companies look for an alternative to group plans.
Dive Insight:
Republican frontrunners for the 2024 presidential nomination have once again started taking potshots at the ACA, a law passed over a decade ago to make health insurance accessible for more Americans.
Despite the failure of past repeal-and-replace efforts, former President Donald Trump has said he is “seriously looking at alternatives” to the ACA, while Florida Gov. Ron DeSantis said he plans to pass legislation to “supersede” the law.
Yet Centene — the largest marketplace carrier in the U.S. by enrollment — isn’t worried, executives said Tuesday. The insurer has continued investing in its marketplace business: Centene expanded its footprint into 83 new counties for 2024 and entered Delaware for the first time, increasing its presence to 29 states.
“Despite some loud megaphones, the political environment for healthcare delivery is relatively steady. We aren’t seeing systemic changes get enacted or gain significant traction,” said Dinesman. “While the ACA continues to be a source of political noise during election years, it remains fortified as the law of the land. It is truly entrenched.”
Health policy experts say the ACA would be incredibly difficult to dismantle. The individual policies it created currently cover around 18 million Americans, while the number of states that have expanded Medicaid coverage under the law now outweigh those that haven’t four to one. It’s also popular with voters: nearly 60% of adults have a favorable view of the ACA, according to polling by the KFF earlier this year.
People are likely to continue flocking to the exchanges next year, mostly due to generous premium subsidies that Congress extended through 2025, making financial assistance available to more policyholders. In addition, people losing Medicaid coverage as states continue rechecking eligibility for the safety-net insurance program should drive growth in ACA rolls.
Centene grew its membership in the exchanges by 76% in the third quarter compared to the same time last year. The pace of membership growth could slow in 2024, but premium revenue should continue increasing, Centene executives said.
“Even if membership is only slightly up in 2024, we expect to grow revenue approximately $4 billion given the steep growth throughout 2023” coupled with price increases, CFO Drew Asher said.
One tailwind Centene called out driving ACA growth is ICHRA, or Individual Coverage Health Reimbursement Arrangements. The model first became available in 2020 as an alternative to traditional group plans. ICHRAs allow employers to give their workers a tax-free monthly allowance so they can shop for a health plan on their own, including through the individual ACA market.
ICHRAs are small now — as of 2022, enrollment entity HealthSherpa estimated that between 100,000 and 200,000 people had the benefit — but are becoming increasingly popular. The Congressional Budget Office estimates that 2 million people could be enrolled in ICHRAs by 2032.
Centene is banking that smaller employers will continue to go the ICHRA route, allowing the insurer to poach members from the employer-based health plan market — the largest source of insurance coverage in the U.S.
“Construction workers, barbershops, aestheticians, convenience store workers, hospitality workers ... those employers are not providing health insurance because they want to deploy those dollars elsewhere. What we’re already seeing is [small group plans with five to 20 members have] essentially migrated into the marketplace,” said Centene CEO Sarah London. “Our hypothesis is really about the idea that that trend is going to continue and move up to the 50 to 75 to 150 small business group.”
Centene partnered with ICHRA administrator Take Command at the end of November to offer ICHRA products targeting small and large employers in Indiana next year.
Centene’s marketplace business currently covers 13,000 ICHRA lives, according to President Ken Fasola.
Centene raised its 2024 adjusted profit forecast on Tuesday. The company now expects full-year adjusted profit of greater than $6.70 per share.
