Health insurers could see surprising losses, a worsening risk pool, challenges with distribution and membership declines from the repeal of the Affordable Care Act, an A.M. Best report states.
Though the study concedes it doesn’t know what will replace it, Potential Impacts of the Repeal of the ACA
analyzes possible risks that may arise for health insurers during the process.
A.M. Best states premium subsidies, cost-sharing subsidies, federal exchanges, expansion of Medicaid and the Individual Mandate all have either a medium or high risk of getting repealed.
“They (health insurers) are going to incur unexpected losses in the line of business,” Sally Rosen, senior director at A.M. Best said. “We can’t say for certain what an insurance company would do, but obviously that tends to affect business decisions.”
The potential losses could come from repealing premium and cost-sharing subsidies, creating a shortfall following the elimination of the sizeable government portion.
In a more positive element, the report said there was a “greater likelihood” the health insurance fee would get repealed, given it got a one year exemption for 2017, a move A.M. Best believes is good for insurers.
However, distribution channels could get disrupted if Federal Exchanges were part of the repeal and not the replacement, the study said.
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“Some companies are selling through the exchanges and there’s also companies that are selling non-ACA products, such as a dental product, on the exchanges and they’re using that as a form of distribution,” Rosen said.
“They’re getting a greater distribution channel by selling on the exchanges than they could possibly on their own. Not for certain, but in some cases they’re selling to a greater amount of people than they could on their own because they’re selling to a number of states on an exchange.”
Released last week, the study states Medicaid has become one of the largest sources of growth for health insurers because 31 states and the District of Columbia opted to expand Medicaid after the federal government fully funded it in 2014.
Those factors led to an increase in enrolment, A.M. Best’s Senior Financial Analyst, Wayne Kaminski explained.
Another aspect of the ACA affecting enrolment is the Individual Mandate, penalizing those who don’t buy health insurance.
The mandate is also an expected part of the repeal.
“The enrollment has been skewed towards an older population, not to mention the under-35s, and it has also been skewed towards the higher risk and higher user of coverage,” Rosen said.