Analysts at Moody’s Investors Service have tried to figure out how the coming U.S. Supreme Court ruling on the constitutionality of the Patient Protection and Affordable Care Act of 2010 (PPACA) might affect health insurer finances.
The analysts ended up declining to make any firm predictions.
“The bottom line is that it is difficult to assess the impact to specific companies until we have a clearer view of the regulatory landscape after the Supreme Court announces its decision,” the analysts conclude.
Stephen Zaharuk and other analysts at Moody’s, New York, prepared a commentary on the implications of the Supreme Court decision in an effort to help investors understand what the decision might do to health insurers’ credit ratings.
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Some of the best-known parts of PPACA call for the government to require health insurers to sell health coverage on a guaranteed-issue basis starting in 2014. Insurers would be able to consider applicants’ age when pricing coverage but not the applicants’ health status.
To keep those requirements from swamping health insurers with sick, expensive-to-insure insureds, Congress tried to compensate for antiselection problems by including a provision that would require most individuals to health coverage and most large and midsize employers to offer group coverage or else pay penalties.
The most visible critics of PPACA contend that the “individual coverage ownership” mandate is as unconstitutional as requiring all Americans to buy broccoli. The critics say PPACA must fall if the individual mandate falls, because the act contains no severability provision calling for the rest of the act to remain intact if one part is tossed out.
The Moody’s analysts have considered the three scenarios that many commentators say are the most likely outcome:
- The court upholds all of PPACA.
- The court finds the individual mandate to be unconstitutional and strikes most or all of the PPACA provisions that affect health insurers.
- The court finds the individual mandate to be unconstitutional but severable from the rest of the law and upholds most or all other provisions of PPACA.
No matter what the court decides, ”we will likely have as many questions as answers,” the analysts say.
What really happens after the ruling comes out will depend on the outcome of the November elections, not just what the court says, the analysts say.
A Republican president could find many ways to delay and dilute implementation of PPACA, the analysts say.