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What’s under that PPACA World rug?

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The Patient Protection and Affordable Care Act (PPACA) commercial health insurance rules and programs seem to be getting a small a honeymoon right now.

Maybe not a Grand Tour of Europe, but at least a daytrip to an outlet mall.

See also: Americans are warming up to PPACA

The PPACA public exchange system has received qualified health plan (QHP) selection information for about 12 million people, and it could get more QHP selections during the current tax season special enrollment period, which started March 15 in many states and is set to end April 30.

Even Republicans who say they hate PPACA are putting some parts of PPACA in their PPACA-replacement proposals. Sen. Ted Cruz, R-Texas, has included an independent claim denials appeal provision in his bill, S. 647, and the Republicans have put many PPACA-like provisions in the Patient CARE Act PPACA-replacer bill. 

Complaints about PPACA-related tax filing problems are starting to surface this week, but, during the first few weeks of the tax season, tax preparers were complaining about how quiet their offices were, not Form 1095 complexity nightmares.

But consumers are starting to post on social media services about long hold times on Internal Revenue Service (IRS) help lines, and other hints of storms to come are showing up in company earnings reports and analyst reports.

For a look at issues that could end the honeymoon, read on.

Men with blank stares

1. Connecture still sees employer interest in back away from offering health benefits.

Connecture Inc. (Nasdaq:CNXR), a company that develops Web-based consumer health insurance shopping, enrollment and administration systems, says it did well in the fourth quarter of 2014.

The company is reporting $4.5 million in net income for the quarter on $28 million in revenue, up from $690,000 in net income on $25 million in revenue for the fourth quarter of 2013.

The company, which supports both public and private exchange programs, saw its contracted backlog increase slightly, to $78 million at the end of the year, up $2 million from a year earlier.

But one trend the company sees is continuing small employers’ interest in getting out of the health benefits provider business.

A week after the company released earnings, it announced a webinar on the movement to individual coverage in the small group market.

Christine Sigrist, a product manager at Connecture, said her company still sees “heightened discussion around migration from small group to individual plans.”

That could be good for insurers selling individual plans through the public exchange system, and for exchanges that depend partly on per-enrollees to support themselves, but it could be hard on the U.S. taxpayer. Federal spending managers would like to see employers continue to subsidize employees’ benefits, to reduce the amount the government spends on exchange plan enrollee premium subsidies.

U.S. Supreme Court

2. Health Insurance Innovations executives see PPACA disruption helping short-term health insurance sells no matter what the Supreme Court does about the King vs. Burwell case.

Health Insurance Innovations Inc. (Nasdaq:HIIQ) released earnings later than it had originally expected, and that raised some questions about what kind of results the company might report.

In the end, the company showed solid growth. The non-major-medical health insurance distributor reported $472,000 in net income for the latest quarter on $25 million in revenue, compared with a $592,000 net loss on $16 million in revenue for the fourth quarter of 2013.

The company did well for agents: It paid them $12 million in commissions, up from $7.8 million in commissions during the year-earlier quarter.

Bruce Telkamp, the company’s chief operating officer, talked about the effects of PPACA, and the King vs. Burwell court case, on the short-term medical market during a conference call with securities analysts.

Telkamp said PPACA has helped short-term medical sales by sharply increasing the full, unsubsidized cost of major medical coverage for consumers who can get through medical underwriting, and by encouraging major medical insurers to emphasize use of narrow provider networks.

In June, the Supreme Court could issue a ruling that would eliminate the ability of the PPACA public exchanges managed by the U.S. Department of Health and Human Services (HHS) to offer premium subsidies for exchange plans.

That “would create substantial additional upside for the short-product category,” Telkamp said.

See also: 10 states where the Supreme Court may help short-term health sales

Dollar puzzle

3. Even some big, well-known insurers are counting on PPACA “three R’s” risk-management programs to make the numbers work in some markets.

Analysts at A.M. Best Company put out a report about another issue related to commercial health insurance market finances: How much health insurers are depending on the PPACA risk corridors program to protect them against underwriting losses.

See also: Court issues CoOportunity liquidation order

Drafters of PPACA created the program to use cash from health insurers with thick underwriting margins to help insurers with poor results.

In December, Congress officially blocked HHS from using taxpayer money to shore up the program if insures with thick underwriting margins are hard to find.

The Best analysts found that at least 10 of the carriers that put risk corridors information in their financial statements for the third quarter of 2014 recorded a risk corridors program receivable that amounted to more than 10 percent of those companies’ capital and surplus. Best had no information about insurers recording big profits that could be used to pay for risk corridors program support for companies with poor results.

Insurers were probably conservative about pricing 2015 products, because of all of the talk about risk corridors program uncertainty that started in early 2014.

“However,” the analysts write, “it is possible that some carriers might experience a noteworthy drop in both absolute and risk-adjusted level of capitalization should the risk corridors receivables have to be reduced or written off.”