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 > Health Insurance

PPACA uncertainty clouds carrier outlook

Your article was successfully shared with the contacts you provided.

The uncertainty over the Patient Protection and Affordable Care Act is taking a heavy toll on carriers.

Moody’s Investor Services announced Thursday it was lowering the insurance sector’s outlook from stable to negative based on uncertainty over the law.

“While we’ve had industry risks from regulatory changes on our radar for a while, the ongoing unstable and evolving environment is a key factor for our outlook change,” Stephen Zaharuk, report author and Moody’s senior vice president said in a statement. “The past few months have seen new regulations and announcements that impose operational changes well after product and pricing decisions were finalized.”

See related: Analyst shrugs off exchange bumps

In addition to the law’s rocky rollout, the administration has announced a series of delays of PPACA components, moves that have frequently angered carriers.

Moody’s cited the slow enrollment of young people as one reason for the outlook change. The administration has said just a quarter of enrollees so far are 18-34, a critical demographic to ensure lower claim costs subsidize less healthy, older individuals.

“This is well short of the original 40 percent target based on the proportion of eligible people in this cohort,” Moody’s said in its analysis.

The credit rating agency also said the impact of the industry assessment tax that begins in 2014 is unclear, noting that “while some insurers built this tax into their premium calculations, the amounts received may still be insufficient to cover their share of the assessment.”

Because of these uncertainties, Moody’s projected net margins could fall by a third.

Moody’s also said lower Medicare Advantage reimbursement rates and a “changing competitive landscape in the commercial segment with the growth of private exchanges” are hurting carriers.

“We continue to expect that these dynamics will have an uneven effect on insurers, as the impact of these factors will vary by market segment and geography,” Zaharuk said. “Moody’s view continues to be that the larger and more diversified insurers will be better positioned, both financially and strategically, to meet the challenges facing the sector.”

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.