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PPACA wobble: What Fitch says about health insurers

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The new federal omnibus spending bill could give U.S. health insurers a $13.9 billion break on their health insurance industry tax (HIIT) bills for 2017, but, overall, it might not be very good for health insurers.

Fitch Ratings gives that assessment in a new commentary on the effects of the Consolidated Appropriations Act of 2016 (CAA).

President Obama signed H.R. 2029, the bill that created CAA, Dec. 18. CAA includes several provisions that soften the effects of the Patient Protection and Affordable Care Act of 2010 (PPACA), including two-year delays in the effective dates of the PPACA Cadillac plan tax and the PPACA medical device tax.

CAA also includes a provision forbidding the U.S. Department of Health and Human Services (HHS) from using any revenue source other than exchange plan issuer contributions to fund the PPACA risk corridors program.

PPACA calls for the risk corridors program to use contributions from public exchange plan issuers that do well in 2014, 2015 and 2016 to help issuers that do poorly during those years. Officials at an arm of HHS warned in October that the program has taken in only enough contributions from thriving issuers to pay about 13 percent of the $2.9 billion in program claims for 2014.

Fitch changed its outlook for U.S. health insurers to negative, from stable, shortly before Obama signed CAA into law, saying that it expects to downgrade more health insurers than it upgrades over the next two years.

CAA increases uncertainty about whether the insurers hoping to collect on risk corridors program claims will get the full amount of benefits they were expecting, according to a team of Fitch analysts led by Mark Rouck.

The $13.9 billion reduction in 2017 HIIT bills could help insurers, but “smaller insurers could be most severely impacted if the risk corridors program is gutted further,” the analysts say.

The delay in the Cadillac plan tax may please employers, benefits advisors and workers with high-cost health benefits, but insurers were likely to pass the cost of the tax on to customers, and the delay will probably help the plan sponsors and enrollees far more than it will help insurers, the analysts say.

See also:

View: Democrats want to topple a pillar of Obamacare 

Hillary Clinton backs PPACA Cadillac plan tax repeal

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