How will the public exchanges affect carriers’ credit levels? Depends on how well they do.
The credit implications of the exchanges — which just opened this week for open enrollment—on health care companies will depend on final enrollment levels, according to a new Moody’s report.
“High enrollment, if sustained, would be credit positive for insurers because it would stabilize premiums and promote the future success of the exchange concept,” said senior vice president Stephen Zaharuk.
Zaharuk said the demographic makeup of the population buying coverage on the exchanges will be the key credit driver.
But the exchanges won’t immediately impact carriers’ credit profiles due to the long initial open period. That means demographic details won’t be available until mid-2014.
Moody’s report also outlined effects the exchanges will have on other health care subsectors.
For-profit hospital operators stand to gain from enrollment in the exchanges if it reduces the number of uninsured individuals who are unable to pay for care.
A reduction in the number of uninsured individuals treated at the hospital would lower bad debt expense and have a positive impact on margins, said Dean Diaz, Moody’s senior vice president.
But higher-than-expected enrollment could have a downside for not-for-profit hospitals if it is comprised primarily of people switching out of commercial plans. “New enrollees would likely shift from commercial insurance to more affordable, low-premium health-care exchange products, which are expected to reimburse at rates lower than traditional commercial insurance,” said associate analyst Carrie Sheffield.
The exchanges will positively impact both pharmaceutical companies and the pharmacy-benefit management sector, even if enrollment isn’t very high.
Additionally, Moody’s analysts said the exchanges will unlikely have any impact on medical device manufacturers.