(Recasts lead, adds hospitals, adds comment from Molina)
By Caroline Humer
NEW YORK, May 4 (Reuters) - While attention is focused on Republicans’ fight to pass a bill to repeal Obamacare starting in 2019, health insurers are busy struggling with decisions they need to make now about how to price premiums and what markets they can afford to be in next year.
Hospitals are on the other side of that coin, concerned that a spike in the cost of Obamacare premiums next year will cause many people to simply drop insurance coverage, reducing their revenues in the near future.
Republicans in the U.S. House of Representatives voted to undo Obamacare on Thursday, but even if the bill - known as the American Health Care Act (AHCA) - is passed by the Senate it would not solve a critical outstanding issue for insurers looking at 2018: Will the government continue to fund the cost-sharing subsidies that help individuals pay for care?
Health insurers in the last two weeks have written letters to Congress, sent out press statements and spoken up on conference calls, saying they need more certainty about the payments.
Thursday’s vote did not change that.
The chief executive of Blue Cross Blue Shield Association, Scott Serota, on Thursday said that the House vote in itself does not stabilize the exchange market. “It also is critical to fund cost-sharing reductions during this time,” he said.
Molina Healthcare Inc, an insurer with over 1 million exchange members, said, “While the debate on AHCA now moves to the Senate, Congress and the Administration must ensure that the state Marketplace exchanges are stabilized through at least 2018,” including finding subsidies and enforcing the mandate that people have health insurance.
Cost-sharing subsidy payments from the government are estimated at $7 billion this year and $10 billion next year. Without them, insurers say they would need to raise rates at least 20 percent next year.
On Thursday, Maryland released the proposed premium rates filed by insurers for the 2018 individual market in the state, which showed increases ranging from 18 percent to 58 percent.
Double-digit premium increases have raised the notion that Republicans are working on parallel paths to undo the law, creating a market where plans are so expensive that they only make economic sense for patients with very high medical costs.
Republicans say Obamacare has already reached that level, and needs to be replaced with a system they say will make it possible for the young and healthy to buy cheaper plans by eliminating required benefits and allowing insurers to charge older patients - who typically have more medical problems - much more.
In states that did not expand Medicaid, a provision of Obamacare that broadened the eligibility of the federal health insurance program for the poor but was subject to approval by state legislatures, hospitals are particularly worried about rising premium costs.
Hospitals in Southern Republican states that did not expand Medicaid said they expect the number of patients covered through the exchanges to drop if prices spike in 2018, increasing bad debt.
“We estimated about a third people on exchange will drop it,” said Will Ferniany, CEO of the University of Alabama at Birmingham (UAB) Health System.
John Haupert, chief executive officer of Grady Health System in Atlanta, Georgia’s largest safety-net hospital, also said after the House vote that he worries that customers who have coverage through the exchanges will not be able to afford Obamacare plans next year.
The hospitals also have longer-term concerns about changes to Medicaid funding under the Republican proposal, but those concerns focus on changes that may or may not take hold in 2019 or 2020.
On Thursday, shares of Tenet Healthcare Corp and HCA Holdings Inc were higher, which analysts said came as the final version of the bill included more money that would flow to hospitals.
The vote comes as state regulatory deadlines to submit 2018 insurance plans have already forced some insurers to make decisions. Aetna Inc, for instance, pulled out of Virginia this week.
“I think the decision-making that we have to make right now has to be based on the reality as it is today,” Aetna’s chief financial officer, Shawn Guertin, said in an interview on Tuesday after reporting that Aetna would lose $200 million on the business this year.
The window may be closing on a decision, but Ana Gupte, an analyst at Leerink, said insurers like Anthem Inc, Centene Corp and Molina were more likely to participate in the exchanges because of the positive vote. It may make it more likely that the government will in fact fund those cost-sharing subsidies, which have been caught up in a tussle, she said.
Anthem shares ended down 0.3 percent, Centene fell 0.2 percent, and Molina was up 1.2 percent. (Additional reporting by Jilian Mincer and Michael Erman in New York and Yasmeen Abutaleb in Washington, D.C.; Editing by Nick Zieminski and Leslie Adler)