Wednesday Morning Ramblings -- January 27, 2016; ObamaCare Enrollment Projections Plummet; Payouts Surge

Another quarter like this and Anthem will consider joining UnitedHealth in threatening to withdraw from ObamaCare. This is quite incredible. Anthem's profit plummets 64%.

From Zacks:

ANTM is one of the premier healthcare service providers when it comes to providing medical and specialty products.Already sporting one of the top position in the health insurance industry, the company is set to become a titan with the pending acquisition of another player Cigna Corp. Anthem is projected to become one of the top three health insurers. Also, the company is expected to witness significant earnings accretion from the deal.

The company has been working towards enhancing healthcare through the provision of reliable and superior quality services. The aforementioned deal is expected to help it in this regard.

However, adverse effect of the Health Insurance Provider (HIP) fee, increased financial leverage, higher medical costs in the Senior, Local Group and State-Sponsored businesses, lower favorable prior year reserve development and the impact of minimum medical loss ratio requirements are a drag.

"Are a drag"? Tell me about it.

Press release:

.... fourth quarter 2015 net income was $180.9 million, or $0.68 per share. These results included net negative adjustment items of $0.46 per share. Net income in the fourth quarter of 2014 was $506.7 million, or $1.80 per share, which included net negative adjustment items of $0.06 per share. Excluding the items noted in each period, adjusted net income was $1.14 per share in the fourth quarter of 2015, a decrease of 38.7 percent compared with adjusted net income of $1.86 per share in the prior year quarter.

Folks are figuring out how to game the system. Wait as long as possible before signing up for ObamaCare, starting medical treatment about the same time; get your prescriptions for the year, and then drop out of ObamaCare (simply quit paying your premiums). Then repeat next cycle, next open enrollment period. We've talked about this before.

In addition, for any insurance program to work, one must spread the risk across as large a risk pool as possible. CBO yesterday from Forbes:

Yesterday, the nonpartisan Congressional Budget Office released its annual ten-year Budget and Economic Outlook.

The document contains the CBO’s updated estimates for economic growth, employment, and the nation’s fiscal health. The most notable change was to enrollment in Obamacare’s health insurance exchanges. The CBO, bowing to reality, slashed their 2016 estimates of exchange enrollment from 21 million to 13 million.

Furthermore, the CBO implied that it expects exchange enrollment to peak at 16 million: a far cry from the 24 million it predicted last March.

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Blinking

Last night, just before going to bed, I posted a note, asking the question, who blinks first, Russia or Saudi Arabia? This morning, posted at 8:20 a.m. ET, this note from 24/7 Wall Street: if OPEC blinks and cuts production, buy these top oil stocks at once. Well, duh.