Wall Street is not expecting the type of robust enrollment in insurance exchanges that the Congressional Budget Office has predicted, but some investors are expecting federal policy changes that expose insurers to more risk.
In July, the CBO estimated that about 7 million Americans will buy insurance through Affordable Care Act exchanges during the first open enrollment period, starting in October, for the 2014 plan year. Meanwhile, investors surveyed by Citigroup's research unit are on average expecting only 4 million enrolling, with between two and three million of those consumers being currently uninsured.
The first open enrollment period could impact the profits of payers and potentially boost earnings for hospital and provider businesses, depending on how many Americans enroll in the insurance marketplaces, and to a somewhat greater extent depending on "who" enrolls, said Citi Research analyst Carl MacDonald in an investors briefing.
The CBO is expecting that 4 million currently uninsured consumers will enroll this fall, along with 1 million now covered in small group plans and 2 million covered through today's unsubsidized individual health plans.
While few investors are expecting delays in the exchanges actually opening and connecting consumers with with health plans, a majority of those surveyed by Citi Research think there's a moderate chance the federal government could extend open enrollment for 2014 or later plan years--if participation is minimal or if risk pools start appearing unsustainable, with generally young and healthy uninsured consumers choosing to pay the individual mandate penalty.
Opening exchange enrollment year-round would remove the what was meant to be a deterrent to individuals who might wait to buy insurance until they need healthcare of some sort--and that could leave many insurers with large risk exposures.
Although some providers may end up with a boon from some payer's member expenses as a result of exchanges, the new reform market will likely have a limited impact on the stocks of larger managed care firms, MacDonald said. Most managed care stocks are up by about 40 percent for 2013, he said.