The projected number of enrollees in health care plans purchased through public health insurance exchanges likely will not be sufficient to absorb the costs incurred by insurers providing those plans, Moody’s Investors Service Inc. said in a report released Monday.
The New York-based credit rating agency said lower-than-expected enrollment growth in the public exchanges established under the federal health care reform law would be “credit negative” for participating U.S. health insurers, particularly smaller insurers without sufficient diversification in their books of business.
“These entities have been relying on increased volume to absorb fixed operating costs and introduce some healthier and younger enrollees to improve the overall risk profile of the insured pool,” Stephen Zaharuk, senior vice president at Moody’s, wrote in the report.
This is a sobering outlook for one of the Patient Protection and Affordable Care Act’s keystone insurance market reforms: state health benefit exchanges. The exchanges are intended to bring a significantly larger volume of individuals and small employers into health coverage by bringing health plans together in a single marketplace, offering coverage on a baseline set of coverage requirements. As well as advance tax credit subsidies to individuals and families to make premiums more affordable.
Consequently, health insurance industry analysts were initially quite bullish in the 2011-12 period, believing the exchanges would be a growth bonanza for health plan issuers. This recent Moody’s analysis however takes a far more bearish view, particularly for smaller, less diversified players.
Need a speaker or webinar presenter on the Affordable Care Act and the outlook for health care reform? Contact Pilot Healthcare Strategies Principal Fred Pilot by email