The latest series of Affordable Care Act deadline delays has done damage to the Obama administration’s political standing, but the negative fallout could be worse—and of a longer duration—for carriers, Moody’s Investor Service said in a recent report.
Allowing individuals to continue in non-compliant policies, delaying the online opening of SHOP, extending deadlines for 2014 enrollment and changing the 2015 open enrollment period will all negatively impact earnings for health insurance carriers in the coming year, according to the ratings agency.
The report’s author, Steve Zaharuk, said the problems with the White House’s last-minute fixes mainly center on how they impact the risk pool for ACA plans—particularly deadline extensions for enrollment.
“This change will likely have a negative effect on the risk profile of the exchange health risk-pool, should healthy younger members take advantage of this last-minute waiver,” Zaharuk said. He estimated that the deadline extension will cause carriers to lose up to two months of premium on these healthy individuals, and further increase the possibility of an adverse risk pool.
Unfortunately, health underwriters are seeing the same trends. Kelly Fristoe, an expert on high risk pools with the National Association of Health Underwriters, said his experience with so-called “young invincibles” has followed Moody’s predictions.
“I’ve talked to a lot of younger, healthier people that could get [an ACA] plan and many of those people are putting it off,” he said. “They always ask the question, ‘When is the last date I can buy the plan and have coverage on Jan. 1?’”
Fristoe also said he agreed that the deadline extensions would create instability in 2015 premium rates, which may cause losses for carriers.
“It goes back to math,” he said. “It’s about the math. That’s all it is.”
Moody’s also lambasted the White House’s decision to push the individual coverage enrollment deadline to Dec. 23—back from Dec. 15—due to the “various administrative problems” carriers will experience in making sure every individual is coded correctly in time to receive health benefits in January.
“If there is a surge in enrollment activity in late December as website issues and other uncertainties are resolved, it will be nearly impossible for insurers to complete the enrollment process in time,” the report said.
The ratings agency concluded its sector comment by warning that any additional changes expected from the White House would compound the existing damage.
“Any further enrollment deadline extensions will exacerbate adverse selection and significantly increase the probability that these products will lower insurers’ expected profits, or even result in financial losses for them,” Zaharuk said. “In addition, the administration’s disclosure that the back-end payment system intended to transfer government subsidies to insurers has not been built, casts doubts on the government’s ability to make timely payouts to insurers.”