A rating analyst is warning that changes in how federal regulators implement the Patient Protection and Affordable Care Act could negatively impact the accuracy of health insurers' pricing models.
Steve Zaharuk, a senior vice president at Moody's Investors Service, wrote about the possible effects of the changes in a new credit outlook commentary.
The commentary comes in light of the U.S. Treasury Department's PPACA employer mandate delay and a move by the U.S. Department of Health and Human Services to loosen exchange income eligibility requirements for a year.
By delaying implementation of the employer mandate, the Obama administration could increase the number of individuals who will be shopping for health coverage through the new exchange system, Zaharuk wrote in the Moody's commentary.
"In addition, some price-sensitive individuals will now have an easier time qualifying for government subsidies," Zaharuk wrote.
The changes could increase individual health policy sales, but, for insurers, the problem is that they have priced their products based on the assumption that PPACA will be fully implemented.
If the government puts off implementing some parts of PPACA, the actual demographics of individual market coverage applicants could be different what the insurers had expected, Zaharuk said.
"Obviously, a less healthy population would result in higher-than-anticipated medical costs," Zaharuk wrote. "This risk is likely, as we expect there will be individuals who use this opportunity to obtain subsidized insurance in 2014 for elective procedures, driving up medical costs."
The insurers that bring in those costlier-than-expected enrollees could face higher customer-service staffing costs as well as higher-than-expected medical costs.
Meanwhile, some individuals that buy individual exchange coverage as a result of the temporary impementation changes could drop their coverage in 2015, when the temporary changes end, Zaharuk said.
For insurers, the possibility that many new individual policy customers could rush out the doors in 2015 will make coming up with 2015 pricing and staffing levels difficult.
If exchanges and state regulators let health insurers change their 2014 rates to compensate for the new regulatory uncertainty, that "would somewhat mitigate the negative implications," Zaharuk wrote.