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Territories face big PPACA risks

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The Patient Protection and Affordable Care Act (PPACA) could quickly wipe out the commercial health insurance market in five U.S. territories.

The two insurers that have been selling individual coverage in the U.S. Virgin Islands have already stopped selling new coverage because of PPACA fears, according to a subgroup at the Health Care Reform Regulatory Alternatives Working Group, an arm of the National Association of Insurance Commissioners.

Regulators from jurisdictions that are skeptical about PPACA created the working group.

The working group’s territories subgroup says in a PPACA implementation paper draft that any PPACA implementation problems are much more serious in the territories than they are in the rest of the United States because of major gaps in PPACA.

The paper covers American Samoa, Guam, the Northern Mariana Islands and Puerto Rico as well as in the U.S. Virgin Islands 

The U.S. Department of Health and Human Services (HHS) has decided that the PPACA health insurance market rules apply in those territories but that the individual and employer coverage mandates do not.

HHS will not be setting up exchanges in the territories, and it will provide only limited Medicaid expansion funding there.

If a territory wants to set up its own territory-based exchange, it can do so, but must come up with the cash to offer the same kinds of health insurance purchase subsidies that mainland U.S. exchanges will offer.

PPACA will ban the use of personal health information when insurers are selling health insurance and sharply limit insurers’ ability to use health information other than age when setting coverage prices.

PPACA backers are hoping the coverage mandates and the public exchange program will make the new underwriting rules financially practical in most of the country, by increasing the number of young healthy people who are paying for health insurance but not filing many big claims.

In the territories, health insurers fear they will get a flood of old, sick applicants but no increase in the number of young, healthy buyers.

The carriers that suspended sales in the U.S. Virgin Islands individual market made the move because they saw they would have no protection against adverse selection, the working group says.

The working group says territories or Congress could help by offering consumers in the territories the same kind of health insurance purchase subsidies the consumers could get if they were in the mainland United States.

In the U.S. Virgin Islands, for example, getting the exchange subsidies up to mainland U.S. levels would cost about $226 million.

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