ACA Regs Add Financial Risk To Insurers

Insurers responded softly if not sweetly to the Obama administration’s latest requests and rule changes for individuals trying to buy coverage in online marketplaces by Jan. 1.

Moody’s Investor Service, which is watching Obamacare from the outside, isn’t so tactful.

The latest changes “impose additional financial risks” on the companies, Moody’s said in a report released this week. The guidelines disclosed Thursday, are “credit negative,” meaning they’re not great news for people who have lent money to insurers.

The timing is “especially troublesome” because it gave insurers less than three weeks to change procedures and computer programs to accommodate the changes, Moody’s said. That “will very likely cause more confusion for individuals insured under these policies,” the report added.

The U.S. Department of Health and Human Services is requiring insurers to accept premiums up until New Year’s Eve for coverage effective Jan. 1. It’s also urging them to let consumers pay premiums after Jan. 1 for January coverage and to let consumers enroll for January coverage after the Dec. 23 deadline.

“It’s asking insurance companies to bend over backward in a very short period of time and do everything correctly so people don’t have a gap in coverage,” Moody’s analyst Stephen Zaharuk said in an interview.

Nobody is saying insurers, a critical partner in the health law’s attempt to expand coverage, will go bankrupt because of the latest changes or the overall risks of selling through healthcare.gov and online marketplaces run by the states.

Since most health plans sold through the marketplaces come with high deductibles, “allowing coverage before any premium is received … is unlikely to pose a substantial financial risk,” Zaharuk wrote. (Patients are likely to be on the hook for paying out of pocket for January care whether they send in premiums on time or not.)

The Affordable Care Act also included financial protections for carriers that enroll disproportionate shares of sicker and more expensive members.

But the online exchanges’ initial difficulties raised the risks of signing up the disproportionately unhealthy, many believe. (Sick consumers needing medical care are more likely to persevere in signing up than those who don’t immediately need insurance.)

So did the administration’s previous request that insurers renew for 2014 older plans that don’t offer all ACA-required benefits. (Unlike the exchange coverage, the 2013 plans allow carriers to account for health status when setting premiums. That could keep healthy subscribers out of the online pools.)

Added to those hazards, the latest changes “complicate administration” and demonstrate “an unstable and evolving regulatory environment well after insurers have had to commit to product and pricing decisions,” Moody’s said.

Kaiser Health News is an editorially independent program of the Henry J. Kaiser Family Foundation, a nonprofit, nonpartisan health policy research and communication organization not affiliated with Kaiser Permanente.