Health Insurers Line Up for New Customers (UNH, WLP, AET, CI)

After spending most of 2009 fighting passage of the health care reform act, insurers have gone quiet on efforts to repeal the legislation and have instead gotten busy figuring out how to turn a profit as a result of the bill.

Major insurers spent a good deal of lobbying cash last year and in the first quarter of this year to influence the health care legislation. Unitedhealth Group, Inc. (NYSE: UNH) spent $4.7 million in 2009 and about $1.8 million in the first half of this year. Wellpoint Inc. (NYSE: WLP) coughed up $4.7 million in 2009 and about $3.7 million in the first half of 2010. Aetna Inc. (NYSE: AET), and Cigna Corp. (NYSE: CI) have also spent more than $1 million in 2009 and the the first half of 2010 on lobbying. Not all of that was spent on the health care reform bill, but it’s probably safe to say that a good-sized portion was.

The insurers are staying quiet about repealing the act because they are looking at new business that could put as much as $40 billion into their pockets in 2014, according to The Wall Street Journal.  The bonanza lies in the opportunity to run privately managed Medicaid programs for the states. The new act will increase the number of Medicaid enrollees by 16 million in 2014.

A spokeswoman for Unitedhealth told the WSJ that Medicaid “is a significant long-term growth opportunity for us. It’s a big market that’s getting even bigger.” Efforts by states to repeal the health care act are exactly counter to the hopes of insurers to profit from the new enrollees.

Not everything about the Personal Protection and Affordable Care Act, or ACA as its known, operates to insurers benefit. New reporting requirements and federal review of proposed premium rate hikes are among the less attractive features of the ACA.

Mandated coverage, however, is very attractive. Virtually all conservative politicians and activists have railed against the mandated coverage provisions of the ACA, but they receive little support from insurers.

The state Medicaid programs are the first opportunity for insurers to cash in on the ACA legislation. It won’t be the last, and it may not even be the largest.

Paul Ausick