Moody's: Coverage extensions could discourage young adult enrollment

Moody's Investors Service blasted the White House's move to extend noncompliant health plans until Oct. 1, 2016, saying it's bad news for insurance companies.

While the two-year extension could ultimately help consumers, as Debbie Gordon, vice president of marketing, sales and product strategy for senior products at Massachusetts-based Tufts Health Plan, told FierceHealthPayer in an exclusive interview, the credit rating firm called the move a credit negative for health insurers.

Extending nongrandfathered plans in the individual or small group markets will create more uncertainty about the insurance risk pools under the health exchanges, which Moody's expects to become riskier.

Healthy and younger individuals will postpone moving to the exchanges, as many will likely hold on to their noncompliant plans for two more years, according to the report. Moreover, higher premiums that take into account risk pool uncertainty and older enrollees will discourage young adults from signing up for exchange plans.

However, the Obama administration's changes to the reinsurance and risk corridor programs will have a positive credit impact for health insurers, Moody's noted. For example, a proposed change to the risk corridor formula would give a larger percentage of losses to insurers in states that allowed people to retain existing policies.

"Although these changes are incrementally better for insurers and seek to reduce the expected premium increases for 2015 policies, they do not do enough to overcome the insurers' concerns regarding the risk pool, nor do they substantially reduce the 2015 premium increases," Moody's Senior Vice President Steve Zaharuk wrote in the report.

In January, the credit rating firm downgraded the health insurance sector from stable to negative, thanks in part to an ever-shifting regulatory environment.

Meanwhile, a January study from RAND Corporation found measures to help Americans keep noncompliant plans will have a limited effect on reform marketplaces.

For more:
- read the report (subscription required)

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