Short Takes On News & Events

Latest Federal Rules, Requests Put New Pressure On Insurers, Says Moody’s

By Jay Hancock

December 16th, 2013, 2:25 PM

Insurers responded softly if not sweetly to the Obama administration’s latest requests and rule changes for individuals trying to buy coverage in online marketplaces by Jan. 1.

Moody’s Investor Service, which is watching Obamacare from the outside, isn’t so tactful.

The latest changes “impose additional financial risks” on the companies, Moody’s said in a Monday report. The guidelines disclosed Thursday, are “credit negative,” meaning they’re not great news for people who have lent money to insurers.

The timing is “especially troublesome” because it gave insurers less than three weeks to change procedures and computer programs to accommodate the changes, Moody’s said. That “will very likely cause more confusion for individuals insured under these policies,” the report added.

The Department of Health and Human Services is requiring insurers to accept premiums up until New Year’s Eve for coverage effective Jan. 1. It’s also urging them to let consumers pay premiums after Jan. 1 for January coverage and to let consumers enroll for January coverage after the Dec. 23 deadline.

“It’s asking insurance companies to bend over backward in a very short period of time and do everything correctly so people don’t have a gap in coverage,” Moody’s analyst Stephen Zaharuk said in an interview.

Nobody is saying insurers, a critical partner in the health law’s attempt to expand coverage, will go bankrupt because of the latest changes or the overall risks of selling through healthcare.gov and online marketplaces run by the states.

Since most health plans sold through the marketplaces come with high deductibles, “allowing coverage before any premium is received … is unlikely to pose a substantial financial risk,” Zaharuk wrote. (Patients are likely to be on the hook for paying out of pocket for January care whether they send in premiums on time or not.)

The Affordable Care Act also included financial protections for carriers that enroll disproportionate shares of sicker and more expensive members.

But  the online exchanges’ initial difficulties raised the risks of signing up the disproportionately unhealthy, many believe. (Sick consumers needing medical care are more likely to persevere in signing up than those who don’t immediately need insurance.)

So did the administration’s previous request that insurers renew for 2014 older plans that don’t offer all ACA-required benefits. (Unlike the exchange coverage, the 2013 plans allow carriers to account for health status when setting premiums. That could keep healthy subscribers out of the online pools.)

Added to those hazards, the latest changes “complicate administration” and demonstrate “an unstable and evolving regulatory environment well after insurers have had to commit to product and pricing decisions,” Moody’s said.

8 Responses to “Latest Federal Rules, Requests Put New Pressure On Insurers, Says Moody’s”

  1. Ronald says:

    ““It’s asking insurance companies to bend over backward in a very short period of time and do everything correctly so people don’t have a gap in coverage,” Moody’s analyst Stephen Zaharuk said in an interview.”

    Will somebody please find me a crying towel? These insurance shysters have been screwing consumers for decades. Isn’t it time we found a way to do healthcare without them?

  2. Patrick says:

    Ronald says:

    Will somebody please find me a crying towel? These insurance shysters have been screwing consumers for decades. Isn’t it time we found a way to do healthcare without them?

    That would be single-payer (a.k.a. socialized medicine using monopsony rather than monopoly power). The history of that is dismal to say the least. All those “advanced” European countries with national healthcare systems are looking at them consuming their entire economies within a decade or so. In real insurance, many people pay in to cover the expenses of the few in need, AND it is run rationally (by actuarial reality) rather than by political patronage and fiat.

  3. killroy71 says:

    Ronald – you have no idea the long hours during nights and weekends this holiday season and beyond that grunts in the insurer trenches will – yes, bend over backward – to get people enrolled and onto computer systems so they can get covered care. The govt intentionally held up rules that states needed to build exchanges, disregarded experts and were horribly negligent and NOW expect insurers to pull their chestnuts out of the fire. When people don’t have their member card Jan. 2, who do you think the White House will blame? those evil insurers – again.

    And if we had single-payer, who do you think runs the administrative end of the business? those evil insurers, which they do already for Medicare. Which, apparently is a good thing given the history of healthcare.gov.

  4. Ray says:

    You may see it that way, but millions of us see insurance companies as knights in shining armor, paying out millions of dollars to cover our medical needs we could never afford otherwise. They save these people, and between all of the marketing, outreach, education, lobbying, distribution, training, research, support, billing, shipping, postage, utilities/rent/overhead, insurance for their own employees, and profit, they do it for less than 15% of what they charge.

    In the free market, this is a margin unparalleled in most industries, including other financial industries.

    The real question is: can we find a way to do healthcare, without those providing the healthcare charging exorbitant prices for procedures. Procedures available in other countries, performed by doctors just as (if not more) qualified, using the same equipment and techniques, trained in the same schools, provided at 10-100x lower cost. Did I mention many of these countries actually have BETTER results (as per the World Health Organization’s annual world health report).

    Insurance is a solution to a broken and inefficient system. PPACA is an attempt at making the solution better, without addressing the problem.

  5. Manny says:

    Ray says, “You may see it that way, but millions of us see insurance companies as knights in shining armor, paying out millions of dollars to cover our medical needs we could never afford otherwise. They save these people, and between all of the marketing, outreach, education, lobbying, distribution, training, research, support, billing, shipping, postage, utilities/rent/overhead, insurance for their own employees, and profit, they do it for less than 15% of what they charge.”

    Okay Ray,

    If your knights in shining armor perform such magic, then why do Americans have the privilege of paying twice as much for healthcare as any other industrialized nation in the world and yet America remains ranked 37th worldwide according the World Health Organization? I will agree that America has the best healthcare…that money can buy. Yet, it seems that somehow some of our political leaders in Congress seem perfectly content to allow 50 million citizens to be uninsured and be forced to get uncompensated emergency room care. This, in turn, is forcing hospitals to close their emergency rooms. I don’t see any knights in shining armor coming to the rescue of hospitals in distress, do you?

  6. Albert says:

    Health care is expensive in the United States in part because of political decisions that:
    (a) make the American market be the place where costs of innovation in medicine are recovered; we effectively subsidize new devices, medicines, and care regimens that other countries get for free.
    (b) To make regulatory approval hugely expensive, which makes the cost of innovation extraordinarily high. American’s pay for FDA approval. Once approved, other countries benefit.
    (c) Unrestrained malpractice lawsuits.
    Manny, you may like these policies. You may not. But Obama is destroying the ability of the US to be a source of innovation in medicine. There are no others. And because we are a source of innovation, care in the US is better than anywhere else on Earth.

    But what about the WHO “statistic”. Based on “life expectancy at birth”. It is clean nonsense as a guide for public policy, and reflects in part the fact that US is a multicultural nation with other issues. For example, public policies created an underclass in American cities, a drug culture and a gun culture that is not found in Sweden, Luxembourg, and the other three dozen countries that rank ahead of us. You may have solutions to these problems, but they are NOT “Obamacare”.

    Further, the US subsidizes defense world wide. When a tsunami hits Sri Lanka, it is the US that has the aircraft carrier that comes to rescue the populace. Further, the “imperial wars” of the US drive costs; Sweden and Luxembourg did not invade Iraq. Again, you may approve/disapprove of the US being the “world’s policeman”, but it has a cost that appears in the medical statistics. As do other features of US culture (in particular, the high level of automobile-related deaths).

    “Low information” people like yourself need to get an education. If you do not like the current “US 37th ranking”, fine. But spend some time to learn WHY this is the case. And stop voting for people who dupe people like you into thinking that a centralized command-and-control medical insurance system that rewards the “ruling elite” will do anything about the ranking that you so deplore.

    Obama has destroyed the US health insurance system. And generated nothing to replace it. Obama has destroyed the engine of innovation in US medicine. It cannot be restored. Obama has killed. And having reelected him just 12 months ago, he will continue to kill, and the American people can do nothing to stop him.

  7. Kelly says:

    Albert,

    Whew! That was a major dump! I hope it flushes!

    Feel better?

    Don’t forget to leave the fan running!

  8. Edward says:

    It’s tough to blame the insurers for this one. Actuarial information is not accurately collected in a month.

    And the Exchanges, in fairness, are not a pot of gold for the insurers. If they were, Aetna and UnitedHealthcare wouldn’t be sitting out of so many states.

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