INDIANAPOLIS (AP) What a difference a year makes.
The nation's biggest health insurers entered last fall cautious about a major coverage expansion initiated by the health care overhaul, the federal law that aims to cover millions of uninsured people.
Investors and company executives were worried because they didn't know how expensive new customers from the overhaul would be for insurers. They also were concerned about added costs from the law and funding cuts to government-sponsored Medicare Advantage plans, a key growth area.
But a year later, these challenges are starting to appear manageable, and investors see much less uncertainty ahead for the sector. Insurers have cut costs and raised prices to help mitigate added expenses from the law. They've also added new business.
As a result, Aetna Inc., UnitedHealth Group Inc. and the Blue Cross-Blue Shield insurer WellPoint Inc. all posted third quarter results that trumped Wall Street estimates and raised their forecasts for 2014. Shares of those companies the nation's three largest health insurers have all repeatedly hit all-time highs this year, their growth easily outpacing broader trading indexes.
"People are starting to understand that the 2015 landscape is a little less harrowing than 2014," said Jennifer Lynch, an analyst who covers the industry for BMO Capital Markets.
The optimism represents a stark contrast to a year ago. Late last year, the overhaul's state-based public health insurance exchanges debuted with the promise to give insurers new customers by making it easier for people to buy coverage, sometimes with help from income-based tax credits.
That new business represents a small slice of total enrollment for most insurers, but it generated an outsized dose of anxiety. Many of those new customers had gone years with no insurance coverage or regular health care, and a glitch-plagued debut of the exchanges created more ambiguity over how expensive the customer base would be.
Plus, the overhaul also heaps additional costs onto the balance sheets of insurers, including an industry-wide tax that is non-deductible. And the law changed how they provide coverage by preventing them from excluding customers with expensive medical conditions.
But the companies seem to be positioned to weather the challenges.
More:
Health care overhaul doubts ease for insurers
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