Seventeen carriers have rates approved for New York health exchanges
New York released approved rates for both individual and small group exchanges along with rates for plans operating in the ISG market off the exchanges. The NY individual market has been dysfunctional for years so health reform should not create rate shock as premiums are already extremely high. The NY small group market in recent years has become largely dominated by UNH, which controls ~45% share. The NY market is seeing increased interest with 17 carriers having rates approved for 2014. UNH’s rates are tracking at the high end of both small group and individual while WLP’s small group rates are also largely above market.
UNH shows clear pricing discipline but could see share losses in small group
The NY market is one of the most important small group markets for United since the company has dramatically grown market share over the past several years. According to the stat filings, UNH’s controlled entities covered nearly 700k small group lives in NY with a commanding 45% market share in 2012. The business produced $3.55 bln in premiums and a 5% operating margin for UNH in 2012. United’s approved small group rates for 2014 are at the high end of the market. Specifically, United & Oxford’s average premium rates for Silver level small group plans are 21-23% above the market while Oxford’s Bronze rates are around 28% above the market average. This means that while the company is showing a clear commitment to price discipline, United could experience a decline in small group market share in 2014.
WLP reengaging with NY small group and individual market in 2014
Over the past couple of years WLP significantly reduced its small group footprint in NY with much of its enrollment transitioning to UNH. WLP is reengaging with this market for 2014 with rates that are generally above the market averages across the metal tiers in the individual and small group market. Aetna’s rates are above the market in individual on average and generally below the market on average in small group. We include a number of tables and charts in this report that evaluate the approved rates across carriers in the NY individual and small group market.
Broader participation in the NY ISG market from non-public health insurers
While the Big Three public MCOs (UNH, WLP & AET) are all participating in the NY ISG market for 2014, many smaller plans are also competing in the market as well. This includes the usual NY suspects like HIP and the upstate Blues plans along with some new entrants including North Shore LIJ and the Freelancers Co-Op.
Valuation and Risks
We now see diversified MCOs trading in a P/E range of 10-12x our 2014 EPS estimates and 14-16x for Medicaid MCOs. Downside risks: rising medical costs; regulatory actions; and govt rate pressures. Upside risks: subdued utilization; profitable growth from health coverage expansions, and strong industry pricing trends.