Moody’s Downgrades Insurers’ Outlook in Wake of ACA Rollout
On Thursday, Moody's Investors Services downgraded its outlook of the U.S. health insurance industry from stable to negative, citing the Affordable Care Act's rocky implementation, the Washington Post reports (Kliff/Somashekhar, Washington Post, 1/23).
The credit rating firm described the current marketplace as an "unstable and evolving regulatory environment" and attributed several key factors to the downgrade, such as:
- A bevy of last-minute regulatory changes and announcements by the Obama administration;
- Lower-than-expected enrollment among young adults in the exchanges (Easley, "Healthwatch," The Hill, 1/23);
- The law's annual tax on insurers (Attias, CQ HealthBeat, 1/23); and
- The potential for greater cuts to Medicare Advantage plans, which it said could "result in significant premium increases and/or benefit reductions, or additional market exits by insurers"(Washington Post, 1/23).
Overall, Moody's projected insurers' incomes in 2014 would be 2% less than previously predicted. Moody's also raised concerns that insurers' premium calculations could fall short of the amount needed to cover the new tax that takes effect this year ("Healthwatch," The Hill, 1/23).
In addition, Moody's cited concerns about future changes to the law from the Obama administration and Congress in response to the troubled rollout, such as a proposed delay to the individual mandate, extending the open enrollment period and eliminating risk mitigation programs. The firm wrote that such changes are "high on the list of additional revisions that would be credit negative" (CQ HealthBeat, 1/23).
The report stated, "These changing dynamics will have an uneven effect on insurers, as the impact of these factors will vary by market segment and geography," adding, "Moody's view continues to be that the larger and more diversified insurers will be better positioned, both financially and strategically, to meet the challenges facing the sector" ("Healthwatch," The Hill, 1/23).
Some House GOP members were quick to tout the report as evidence against the ACA.
House Energy and Commerce Chair Fred Upton (R-Mich.) said, "Moody's latest downgrade is further evidence that the president's health law is not the right prescription for reform," He added, "Health care should be about providing peace of mind, not generating costly rules and regulations that foster an environment of tremendous uncertainty and confusion."
Rep. Renee Ellmers (R-N.C.) also cited the Moody's report as evidence that the ACA should immediately be repealed and replaced. In a statement, she said, "This morning, Moody's verified something we have warned about for years: that America's health care system is facing imminent danger due to Obamacare."
However, White House Deputy Senior Adviser David Simas on a conference call Thursday downplayed some of the concerns raised in the report, particularly those over low enrollment rates. He noted that the exchange's enrollment rates are in line what happened following enactment of Massachusetts' 2006 health reform law. He added that data and expert predictions suggest that young adults will enroll in coverage towards the end of the enrollment period (CQ HealthBeat, 1/23).This is part of the California Healthline Daily Edition, a summary of health policy coverage from major news organizations. Sign up for an email subscription.