Monday, September 24, 2018

© Reuters.  Lower potential income exposure to charitable premium assistance program propels DaVita, shares ahead 4%© Reuters. Lower potential income exposure to charitable premium assistance program propels DaVita, shares ahead 4%

  • DaVita (DVA +4%) says if its charitable premium assistance program was eliminated, an unlikely scenario in its view, annual operating income would be trimmed $100M – 250M, assuming that most patients with commercial insurance would continue coverage, either with their current plan or a new one.
  • ~1,800 DaVita patients in the individual market segment receive charitable assistance. Most maintain their pre-end-stage renal disease (ESRD) coverage. The company says the majority would have access to premium tax credits and would be able to afford their premium without the charitable contribution. Nevertheless, it projects that annual operating income would be reduced by $45M – 90M if the program were discontinued.
  • In the commercial group segment, about 4,000 DaVits patients receive charitable premium assistance. About 55% are covered under employer-provided coverage and they receive charitable assistance to ease the financial burden of their co-pays, ~$200 – 300/month. The company believes most would continue coverage without the assistance.
  • The other 45% are on COBRA plans. The company believes many who could no longer afford the COBRA premium without financial help would qualify for and migrate to individual plans with premium tax credits, adding that a substantial portion would maintain coverage even without the assistance.
  • About 80% of the 19,000 DaVita patients in the government segment receive charitable premium assistance. The company believes that most would retain their Medicare coverage if the financial help was eliminated but they would likely lose their secondary (Medigap) coverage. It says the impact on operating income would be limited but there would be significant negative consequences for many patients.
  • Management will be prepared to answer additional questions during its Q3 earnings call.
  • Previously: DaVita discloses potential $450M exposure to operating income from charitable premium assistance (Oct. 10)
  • Now read: Providence Service Corporation: Underfollowed, Undervalued Medical Transportation Play

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