Humana Taking Advantage Of Obamacare Exchanges

The new heatlh insurance marketplaces set up under Obamacare will give health insurance companies access to 40 million new potential customers. With federal subsidies set to pick up a siginficant portion of the premiums for these new customers, health insurance companies have an opportunity to significantly increase their presence in the individual market.

Humana HUM is among one of the many companies that is competing for these new consumers and is adopting a unique strategy in doing so. An analysis of Humana Plan Offerings through the federal marketplace on Healthcare.gov shows that the in the 12 states where it offers plans, the company's plans almost always have the lowest premiums in their respective areas. In fact the premiums are so competitive, many of their higher tier Gold and Platinum plans are significantly cheaper than the Silver plans offered by their competitors. 

For older customers seeking higher cost sharing benefits in their insurance plans, the Humana Gold and Platinum offerings will be extremely attractive based on their relative prices. For younger adults, now forced to consider insurance, the cheaper plans from the company will likely acquire a large share of the new customers. Consumers shopping for insurance often cite premiums as the number one factor when it comes to choosing an insurance plan. Health insurance companies also tend to have high retention rates when it comes to customers, making new consumer acquisition an important step in developing long term revenue streams.

Another way that Humana's strategy is unique when it comes to the new marketplaces, is in its selectivity when it comes to market participation. While most companies are offering plans across entire states, or rating areas (geographic areas consisting of multiple counties), in many states Humana only offers plans in a handful of counties. In the state of Louisiana for instance, the company is selling marketplace plans only in Jefferson Parish, home of New Oreleans and forgoing any competition in the rest of the state. In the other handful of states the pattern is similar, Humana competes in counties with higher than average populations.

The company's strategy is a sign that when it comes to the Obamacare marketplaces, it intends to selectively target areas where it can compete for marketprice through pricing pressure, as well as leverage scale through a larger consumer base.