Best’s Briefing: Health Insurers Adjust to Changing Landscape; Pressures Build Toward 2014
The U.S. Supreme Court’s ruling to uphold the Patient Protection and Affordable Care Act (PPACA) has not caught health insurers off guard. Since PPACA legislation was enacted in 2010, health insurers have been preparing to operate in a new health insurance environment for 2014—one that includes the individual mandate, guaranteed issue for coverage and health insurance exchanges, among other provisions.
has maintained a stable outlook on the majority of health insurers as their earnings have strengthened over the past few years, largely due to improved, lower utilization and more diversified sources of income and revenue. While margins are expected to narrow as utilization returns to more normal levels and the impact of PPACA begins to be felt, A.M. Best expects the majority of health insurers to remain profitable.
Furthermore, health insurers have been in discussions with governors, state legislatures, insurance commissioners/departments and other parties on the importance of establishing a framework for state-based health insurance exchanges. If a state does not have a state-based exchange established in time for a Jan. 1, 2014 effective date, the state would utilize the federal health insurance exchange until a state exchange can be established. However, to date, less than one-third of the states have passed exchange legislation, and numerous states have taken no significant steps toward developing exchanges or passing exchange legislation. Additionally, while some states were waiting for the Supreme Court’s decision, others are waiting for the outcome of the November 2012 elections. If the Republicans gain control in these elections, including the presidency, the law may face challenges in Washington.
Much work needs to be done to make exchanges operational, and rules have yet to be defined, such as essential benefits and subsidy levels. As such, there could be delays in implementing exchanges as there may not be enough lead time to get state-based exchanges fully operational for open enrollment for a Jan. 1, 2014 effective date.
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