Close Close
Popular Financial Topics Discover relevant content from across the suite of ALM legal publications From the Industry More content from ThinkAdvisor and select sponsors Investment Advisor Issue Gallery Read digital editions of Investment Advisor Magazine Tax Facts Get clear, current, and reliable answers to pressing tax questions
Luminaries Awards

Life Health > Health Insurance > Life Insurance Strategies

Moody’s worried about carriers’ future

Your article was successfully shared with the contacts you provided.

Moody’s Investor Service is not a fan of the administration’s postponement of key elements of the Patient Protection and Affordable Care Act.

Moody’s has issued a “sector comment” pertinent to U.S. insurance providers that paints a dim portrait of the carriers’ abilities to offer affordable health insurance in the wake of the latest extension allowance by the administration.

President Obama recently announced that consumers can renew their current health coverage even if that coverage doesn’t meet the criteria established by the law.

Related story: PPACA woes become credibility fight

This will offer millions of Americans an excuse not to buy coverage through the state exchanges, Moody’s noted. Combined with the already low sign-up rate on the exchanges — especially among the critical millennial generation — Moody’s is skeptical that carriers are going to be able to cover the cost of offering the subsidized plans to the millions who are expected to apply for it.

“The President’s administrative fix compounds the risk of insufficient enrollments in the ACA’s health insurance plans to provide insurers with sufficient premiums to cover their costs,” Moody’s said. “Additionally, according to the Department of Health and Human Services, enrollment on the exchanges thus far is much lower than government projections, a credit negative for participating health insurers.”

Moody’s named some of the carriers that it thinks will likely take a hit as the administration tries to correct course.

“For insurance companies that have invested heavily in the insurance exchanges in the hopes of obtaining increased individual enrollment, such as WellPoint, Inc. (Baa2 stable) and Health Net, Inc. (Ba3, positive), these results are a serious disappointment. Besides the low return in membership from their administrative expense investment, the exposure to adverse selection is likely to negatively affect earnings in 2014,” Moody’s said.

Still, the situation could right itself, Moody’s suggests.

“Since the open enrollment period does not end until March [31], the enrollment figures could improve. However, given the technical problems on the health exchanges’ websites, the President’s administrative fix that allows insurers to reinstate recently cancelled policies, as well as the possibility of further legislative or administrative action to either delay the individual mandate or extend the open enrollment period, the prospect for meeting the Congressional Budget Office’s projected enrollment figure of 7 million by the end of March is unlikely.”

See also:


© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.