The health insurance industry will face intense regulatory scrutiny due to the new Patient Protection and Affordable Care Act and its companion, the Health Care and Education Reconciliation Act of 2010, according to Milliman Inc.
PPACA was created by H.R. 3590 and HCERA, which was signed into law today, was created by H.R. 4872.
“While new regulation does not necessarily go into effect immediately, it is clear that health insurers now face increased scrutiny and a new layer of regulatory complexity,” researchers at Milliman, Seattle, write in an analysis of the new laws. “Health plans will have to focus on minimum loss ratios and administrative efficiency and will have to balance challenging cost dynamics against the need for affordable policies.”
PPACA would create a new system of health insurance exchanges that would help individuals and small businesses buy subsidized, standardized packages of health benefits. The new exchanges will change the level competition, the researchers say. The effects will be different in each state, and they may include reduction of distribution costs and potentially tempering of rate increases in the individual and small group insurance markets, the researchers add.
Also, due to an influx of an estimated 30 plus million new people into the insurance and Medicaid markets, “insurers will face unique pricing and risk-mix challenges,” the researchers write.
Some of the other considerations the researchers have identified:
- Cost effectiveness will be central, as in provider risk-sharing methods and evidence-based medicine. However, the researchers also note that “a new emphasis on prevention has uncertain cost implications.”
- New requirements–such as minimum loss ratios for insurers and the new tax on health insurers that sell relatively expensive “Cadillac plans,” which is set to take effect in 2018–will affect plan design.
- Medicare Advantage plans will become less attractive to consumers and carriers, and the plans will face difficult questions about efficiency and benefits mix.
- Enterprise risk management will become essential.
- Strategic considerations will be influenced by local dynamics, including geographic cost variation and the existing regulatory environment in each state.