Insurance giant, Wellpoint says it's worried about the decline in customers and spikes in recently laid off enrollees who rely on employer sponsored COBRA coverage. This will dramatically affect operating income next year, according to Wellpoint. Insurers also anticipate rate increases to offset their losses.
"The government's effort to help workers keep health benefits after they lose a job could wind up costing WellPoint and other insurers dearly in the fourth quarter," the company said in a statement Wednesday. UnitedHealth Group Inc. said its enrollment in plans sold to employers fell 6 percent for the second-straight quarter. WellPoint and UnitedHealth are the two largest publicly traded health insurers based on both enrollment and revenue.
Earlier this year, the federal government offered newly unemployed workers a 65 percent subsidy to help with their COBRA payments. Insurers such as Wellpoint claim that they lose money on COBRA enrollees because they keep their coverage to cover chronic conditions and other health problems. WellPoint, says it spends between $1.50 and $2 on claims for every dollar it collects in COBRA premiums.
Many COBRA enrollees will lose their coverage at the end of the year when the subsidies expire and they can no longer afford insurance on their own. Insurers expect to be deluged with claims in patients' rush to squeeze in as much care as they can before then.
WellPoint also said it saw a $20 million increase in flu-related expenses, mostly in the last two weeks of September. It expects that trend to continue into December.
- see this Associated Press story